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Global central banks could use RBI template
March 21, 2023
“Central banks cannot be alpha centric, but have to consider systemic beta more in their policy experiments/responses. We take a cue from former RBI governor YV Reddy; many central banks in the developed world focus only on containing inflation, and not maintaining the stability of the financial system! Balance should tilt towards systemic stability,” the report said.
The report comes in the wake of US Federal Reserve and other major central on Sunday announcing a coordinated effort to improve banks’ access to liquidity.
While the failure of Silicon Valley Bank, Signature Bank and Credit Suisse has raised questions over the health of the banking system across the globe, the SBI report has highlighted that such failures are unlikely to occur in the Indian context.
“The short-term borrowing like uninsured deposits by FRB (First Republic Bank) of $30 billion from a suite of 11 different US-based banks for an ultra-short term period of 90 days is short-sighted if we compare such packages in India in 2008 and 2020, when the consortium of banks or champion banks handheld the ailing banks for a multi-year period (for example in 2020, it was for at least three years!),” the report said.
Important Links:
- 4-IN-1 Professional Diploma in Banking, Financial Services & Insurance (PDBFSI): https://tscfm.org/courses/4-in-1-professional-diploma-in-banking-financial-services-insurance-pdbfsi/