FICCI-IBA banking summit deliberates on 'Cross-border co-operation'

Mumbai, Sep 26 (UNI) The three-day banking summit on 'Global Banking: Paradigm Shift - Towards Meeting the Emerging Challenges', jointly organised by the Federation of Indian Chamber of Commerce and Industry (FICCI) and the Indian Banks Association (IBA), which began here today focussed largely on the implementation of Basel II reforms with a thrust on cross-border cooperation.

Speaking on the occasion, Mr Malcolm D Knight, General Manager, Bank for International Settlements (BIS), Switzerland, said it calls for capacity building in banks and supervisory levels, improving the culture of risk management and establisjing strong and reliable IT sytems.

''In order to conserve scarce financial resources, ensure a level playing field for banks operating in multiple jurisdictions and minimize supervisory arbitrage, it is essential to ensure proper coordination and cooperation among home and host supervisors.'' Such cooperation arrangements, Mr Knight continued, need to have both comprehensive and flexible enough to capture the specific cross-border challenges.

Elaborating, Mr Knight said Basel II would go a long way in encouraging and continuing with improvement in risk measurement and risk management practices in banks. ''This will lead to a closer alignment of regulatory capital with how banks calculate and manage their economic capita l and over time, it will contribute to improved bank risk profiles and a strengthened financial system,'' he said.

The BIS Executive said financial stability at the national and global level hinges on ensuring effective cross-border cooperation, enhancing the strength and resilience of the financial system through sound corporate governance practices and continuing efforts towards greater interaction between accounting and prudential standard setters.

Mr Qasim Ibrahim, Minister of Finance and Treasury of Maldives, emphasized the imperative of cashing in on the mobile telephone revoltion. ''This technology provides a great opportunity to take banking to the rural areas and bringing the large unbanked sectors of the society in develping countries into the formal banking channels,'' he said.

Failure on the part of banks to innovate and ride the wave would lead to disintermediation as people wwho work across borders would transfer thrier funds through informal channels, Mr. Ibrahim cautioned.

Mr Saroj Kumar Poddar, President, FICCI highlighted the challenges confronting the banking sector and called for rasing productivity along with expansion of the banking network, innovations to reach out to rural areas, lowering of spreads and availability of long-term credit for the manufacturing sector. He also dwelt on structural reforms of cooperative and regional banks and increase board independence along with increased accountability, besides world-class supporting infrastructure and autonomy to public sector banks to fix employee compensation for enhancing effieciency and motivation.

Mr O P Bhatt, Chairman, State Bank of India&Chairman, said a major challenge for bankers was to reach out to those who were financially excluded and struck a note of warning: ''Financial exclusion is not only morraly reprehensible by politically unsustainable. If not tackled, there will be unmanageable unrest that will threat to rip asunder the very fabric we are trying to make.'' Mr B N Rao, Chairman&Managing Director, Canara Bank and Deputy Chairman, IBA, said globalization poses challenges of Basel II implementation, enhanced corporate governance, alignment of regulatory and accounting requirements, and application of advanced technology. ''These siiues affect the ability of countries to coinduct cross-country business and the ability to cope with the possible downside risks. Strengthen the resilience of Indian banks requires a more responsive organisation to meet the demands of customer relationships, product differentiation, intangibles, not captured in balalcnce sheets, corporate governance and regulatory prescriptions,'' he said.

Mr Sushil Jiwarajka, Vice-Chairman, FICCI - Western Region summarised the inaugural summit and proposed a vote of thanks.

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