POLICY COHERENCE TO WIDEN
FINANCIAL INCLUSION
IN COMMUNITY
UNI Finance – UNI LC Japan Global Workshop on
Greater Resilience against Failure of Financial Policy
Based on Market Fundamentalism
10-11 JUNE 2013, TOKYO, JAPAN
ENGAGE EMPLOYEES FOR EFFECTIVE PEER REVIEWS
FOR BETTER STANDARDS IN FINANCE INDUSTRY
Jayasri Priyalal
Director, UNI Apro Finance Sector Activities
PRESENTATION OUTLINE
 Background – Where are we now? How the past
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
Regulations worked?
Shortcomings –Regulatory Vacuums -BASLE I>>> BASLE II >>>>
G20 FSB >>>BASLE III
Two Schools of thought – “Consistency or Coordination” –
Appropriate Regulation Depending on Country situations
FSB initiatives – through SCSI – Thematic Review and Country
Reviews – WB and IMF – FSAP [Finance Sector Assessment
Program]
Firm Stakeholder Engagement for Effective Peer Reviews –
Experience of Central Bankers, Employees and Representative
Finance Industry Trade Unions – Global Reach - Networks –
Taking account of differences in Development levels of
individual countries- ENGAGE FROM THE BEGINNING
CONCLUSIONS
DYN A MICS O F TR A D E I N S E RV IC ES W TO L I B E RA LIZATIONS
AT TE M PTS – D E - R EGULATIONS TOWA R DS
O PE N ING U P C A PI TA L AC COU NT
OV E RV IEW O F TH E S I TUATI O N A S AT E N D 2 0 0 5
 Services accounts 1/5 of Global Trade
 Three Quarters of trade in Services are accounted by
OECD countries
 Services contributes 60 -70% of GDP of OECD
countries
 Only one quarter of services un-equally distributed
among developing countries
 Travel/Transport dominates in Services but FINANCE
has a huge potential- Endless Innovations
 Increased cross boarder capital flows – impact on
macro economy, destabilizing effects
 Undermines the prudential measures of domestic
regulators/authorities
WTO GATS :TRADE UNION RESPONSES
 Risks overweigh Opportunities
 Promotes transparency on Governments What about Corporate
Entities/MFIs?
 Beyond Wisdom gained through past Financial Crises in South
America, Nordic, Eastern Europe and in South East Asia – in
spite of prudential and regulatory measures
 Limitation of Article X – non reversibility of commitments –
ONE WAY
 Cost of financial crisis in Economies, particularly in
informal/rural sectors in South Asia – Marginalized populations
– Macro Economy/inflation
 Change of direction – Standards to be set with the inclusions of
experts, regulators, Central Bankers from financial industries
and not limiting to trade specialists
 Consultations with Trade unions as an important stake holders
in the industry
THIS SLIDE IS FROM PRESENTATION MADE AT 1ST SAFSUC MEETING HELD IN DELHI APRIL 2006
EVOLUTIONS: BASLE I >>>> III
 BASLE I : Asset & Liability Management to Risk
Management
 BASLE II : “Outsourcing Regulatory Function to Third
Parties – Rating Agencies” – Internal Ratings Based
[IRB] approach for risk assessment
 Lacks : Attention to Systemic Risk, Focus on Off Balance Sheet
items, Control on Shadow Banking
 Reputation Risks under emphasized assessing Operational Risks
 BASLE III : Regulation on Leverage Ratio & Liquidity as a
supplement to risky assets. SAFETY precedes
EFFICIENCY, transparency and timely disclosure,
promote role of Government
CONSISTENT VS. COORDINATED
REGULATORY FRAMEWORK
 Current – Consistent framework
concentrate on Developed
economies – OECD – Market
Based Financial Systems
 Active and continuous financial
innovation in developed
economies – Focus is on SAFETY
 Limits financial innovation to
maintain stability in the system
 Interest of Developing
economies has not received
adequate focus and derive NO
benefits
 Developing Emerging Economi es
have low level of financial
development and innovation
 Needs to loosen the regulation to
increase EFFICIENCY
 Bank Based Financial Systems
 Diverse Regulatory systems
through coordinated approach
works better
 International Coordinati on and
Cooperati on is necessar y as out of
US$ 34.2 Bn Banking Assets
monitored by BIS 30.3 Bn are
external assets (as of 2011) –
Needs cross country coordinati on
 Case of India – RBI is keen to set up
colleges of supervisors for local banks
those who possess 15% or more
external assets ( as per new banking
industry reforms)
FSB – PEER REVIEWS MONITORED BY STANDING
COMMITTEE ON STANDARDS IMPLEMENTATION
[SCSI]
 A mechanism – to promote complete & consistent
implementation of REFORMS – Why regulate? What is
the right balance?
Financial
Innovation
Stringent Regulation
• Excessive
Innovation or
insufficient
•
or No Regulation
•
•
Regulatory
Lag
Achieves new
Products
Efficacy
Risk
Diversification
Economy
Wide Welfare
OBJECTIVES OF FSB PEER REVIEWS
 Exchange information on Regulatory supervisory and
finance sector policies
 Evaluate Adherence – Financial Stability>> Openness &
Transparency>> International Standards
 Foster a race to the top by effective implementation of
Regulatory and Supervisory Policies
 Assess the Effectiveness of International Financial
Standards
 Mutual, Cross –Sectoral, Cross –Functional, System wide
Evaluations – Employees and Trade Unions Voice is a valuable
component in the process - Value volunteerism and Expertise of
Trade Unions
TWO TYPES OF PEER REVIEWS PROCESS
IN AREAS WHERE NON
EXISTENCE OF INTERNATIONAL
STANDARDS & POLICIES
CRITICAL FOR GLOBAL
FINANCIAL STABILITY
THEMATIC
REVIEW
Encourage Consistent
Cross country/sector
Implementation of
regulations for financial
stability
WHERE NO SINGLE
STANDARD SETTING
BOARD IS RESPONSIBLE
E.g. Reducing Reliance of
CRA Ratings
IMF & WB (FSAP)
NATIONAL FINANCE
SECTOR ASSESSMENT
PROGRAM
COUNTRY
REVIEW
Examine steps taken by
national authorities for
regulations and
supervision
FSAP & ROSC
REPORT ON THE
OBSERVANCE OF
STANDARDS AND
CODES
E.g. Country Review South Africa
PROCESS
STAGE 1
PRIORITIZATION
STAGE 2
PREPARATION
[TEAM SELECTION]
STAGE 3
CONSULTATION
STAGE 4
EVALUATION
STAGE 5
FOLLOW UP
SCSI CHAIR TO
SOLICIT
VOLUNTEER
NOMINEES
FINANCE INDUSTRY
TRADE UNIONS TO
FIND SPACE AT THE
TABLE BE PART
OF THE TEAM
CRITERIA TO BE A
MEMBER IN PEER
REVIEW TEAM.
• RELEVANT
EXPERTISE
• INDEPENDENCE OF
JUDGEMENT
• ABILITY TO DELIVER
HIGH QUALITY
TIMELY WORK
CONCLUSIONS
 Causes and Effects led to the GFC
 Unrestricted financial innovation accelerated the speculative drive and
destabilized the financial market
 Structural imbalance between financial innovation and financial
regulation
 Innovations were limited to balance sheets for profit engineering
through increase leverage and returns
 Finance industry employees and their representative trade unions have
a long term interest for sustainable business growth by promoting
holistic economy wide welfare. Peer reviews appears to replace the
concept of college of supervisors – Common Call by UNI and Global
Union Council
 Engage Trade Unions in FSB’s PEER review mechanism for appropriate
regulation –as a bottom up approach for effective regulation –to
stimulate responsible innovation that harms no other economic agents
welfare