UAE. “Today’s euro crisis is a clear case of conflict between monetary and fiscal policies”, says Dr. Seetharaman, Group CEO, Doha Bank, who participated as a keynote speaker in the reception held at the Centre de Convencions Internacional de Barcelona (CCiB), Barcelona, Spain.
The European University celebrated its 40th year of diversity in business education last week.
Dr. Seetharaman highlighted how the current global crisis had an impact on the global economies and human lives. He said “This crisis is a social crisis and not just a financial crisis. As a result, of financial innovation, new business models of banks emerged which changed the underlying economics of banking as new financial instruments enabled credit risk to be shifted away from the originators of loans.
"However, securitization also changed the nature of risks and, in particular, transformed credit risk into liquidity risk, then into a funding risk, and ultimately into a solvency risk.”
Dr. R. Seetharaman highlighted the key reasons for the crisis and the areas which require attention from regulatory level and macroeconomic policy level. He said, “Financial regulators were not equipped to see the risk concentrations and flawed incentives behind the financial innovation boom. Neither market discipline nor regulation were able to contain the risks resulting from rapid innovation and increased leverage, which had been building for years. Policymakers failed to sufficiently take into account growing macroeconomic imbalances that contributed to the buildup of systematic risks in the financial system and in housing markets.
"Financial supervisors were preoccupied with the formal banking sector, not with the risks building in the shadow financial system. The key areas which required attention from regulatory level are scope of regulation, market discipline, information gaps and systemic liquidity provision. The key areas which required attention at the macroeconomic policy level are response of monetary policy to systemic risks, strong fiscal policies, and regulation of international capital flows and alignment of fiscal and monetary policies.”
Dr. R. Seetharaman gave insights on the current trends in financial markets. He said, “Japan had come with the easing measures recently which involved enhanced purchases of long-term Japanese government bonds. This move sent the dollar close to the ¥100 line .Last week the IMF said it was lowering its outlook for world economic growth this year to 3.3 per cent, down from its forecast in January of 3.5 per cent. It expects U.S. economic growth of 1.9 per cent this year, down from its January estimate of 2.1 per cent.
"It expects that the combined economy of the 17 euro countries will shrink 0.3 per cent in 2013. Sluggish global economic recovery, increasing energy production in the U.S. and slightly slower growth in China had put pressure on oil prices recently. Gold prices had fallen on reports Cyprus could sell a significant volume of gold. Gold and industrial metals fell hard after China reported that economic growth slowed unexpectedly in the first three months of the year.”
Dr. R. Seetharaman highlighted the regulatory reforms in response to the crisis. He said, “In response to the crisis, the Global regulatory reforms had been actively reviewed under the leadership of G20 countries in co-ordination with financial stability Board (FSB), International Monetary Fund (IMF) and Bank for International settlements (BIS).
'The Dodd–Frank Wall Street Reform and Consumer Protection Act in US implemented the regulatory reforms in response to the crisis. The Volcker’s Rule was enacted under this regulation to restrict proprietary trading. The SEC also proposed tougher disclosure rules for Hedge fund and private equity firms. FSB, IMF and BIS are working on macro-prudential policy frameworks, including tools to mitigate the impact of excessive capital flows.
"Policy framework for systemically important financial institutions, regulation and oversight of shadow banking, risk practices on structured products were some of the areas which required review in the light of current crisis. Basel 3 is also planned to be implemented. The banking business model will be redefined on account of shift from de-regulation to re-regulation.”
Dr. R. Seetharaman also highlighted the major reforms impacting Banking Industry. He said, “Basel 3 has brought reforms to increase quality and consistency of capital, increase counterparty credit risk charges, restrict leverage, reduce capital buffers, and increase the quantity and quality of liquid assets and funding profile of banks.
"The Dodd–Frank Wall Street Reform and Consumer Protection Act in US created a new consumer protection agency to protect consumer interests. The retail segment and the investment book of banks have been regulated after the crisis. The reforms underway pertaining to the banking industry includes strengthening the oversight and regulation of shadow banking, building resilient financial institutions and ending too big to fail.”
About Doha Bank
Doha Bank is the largest private commercial bank in the State of Qatar. It was incorporated in 1978 and commenced its banking business (including its International Banking services) in Doha, Qatar on March 15, 1979.
As one of Qatar's leading financial services company, Doha Bank is committed to making banking work for customers and clients like it never has before. Through innovative technologies and the ingenuity of its people, Doha Bank provides individuals and commercial, corporate and institutional clients across Qatar and even internationally, new and better ways to manage their financial lives. The company enables customers to do their banking and investing whenever, wherever and however they choose through an extensive network, and multiple access channels.
The Dubai branch of Doha Bank was opened in 2008.