A resilient financial system is one which is able to absorb the impact of endogenous shocks it is exposed to, rebound quickly to the original condition or adapt to new environment, and continue to perform its role of providing financial services. Whereas a stable financial system is one which is able to absorb shocks, a resilient financial system will be able to adapt and reconfigure itself in response to a shock, in addition to absorbing it. Unlike stability, resilience makes no assumptions about the magnitude of possible shocks, but rather looks to build systems that can deal with the entire range of shocks.
MORAL HAZARD AND RESILIENCE
Absence of moral hazard plays a substantial role in building a resilient financial system. Why would a bank invest in building a robust risk management system if in extreme cases, taxpayers’ money would be used to rescue them. Shareholders of a bank will have incentive to seek better governance and risk management capabilities only if their investments are at risk. Similarly, employees of a bank should also have skin in the game.
RESILIENCE IS A COLLECTIVE EFFORT
Building a resilient financial system is a collective effort and cannot be left to regulators alone. While the regulators contribute majorly by framing appropriate regulations, a tick box approach to risk management by the banks would mean that the market’s wisdom is replaced with regulator’s wisdom. Regulations provide for minimum requirements to be met by all regulated entities. Hence, a resilient financial system requires contribution from all stakeholders - depositors, borrowers and investors - to achieve a resilient financial system.
Mahesh Kumar Jain
LEMON PROBLEM – INFORMATION ASYMMETRY
Diese Geschichte stammt aus der October 2021-Ausgabe von Banking Frontiers.
Starten Sie Ihre 7-tägige kostenlose Testversion von Magzter GOLD, um auf Tausende kuratierte Premium-Storys sowie über 8.000 Zeitschriften und Zeitungen zuzugreifen.
Bereits Abonnent ? Anmelden
Diese Geschichte stammt aus der October 2021-Ausgabe von Banking Frontiers.
Starten Sie Ihre 7-tägige kostenlose Testversion von Magzter GOLD, um auf Tausende kuratierte Premium-Storys sowie über 8.000 Zeitschriften und Zeitungen zuzugreifen.
Bereits Abonnent? Anmelden
Kamdhenu & Sammrudhi loans top rural customers
Unnayan Bharat Finance Corporation (UBFC) Director & Co-Founder Avneesh Trivedi shares the company's attempts to enhance the rural lending environment & deliver better services to its consumers:
It's going to be a 'world' of CBDCs
Practically, every central bank in the world is testing and readying a CBDC system:
Training for behavioral & social skills is key
3 CHROs from the top BFSI companies in India open up about their training and motivation programs aimed at enhancing employee effectiveness. The story is divided into 4 parts: (i) functional and behavioral training, (ii) manager to leadership training, (iii) learning-based training, (iv) motivational programs:
THE AI COMPASS
Artificial Intelligence has risen to be the hottest topic of discussion today. It is expected to impact everyone, and the impact could exceed that of war, global warming, supply chain disruptions, geopolitics, and much more.
To mentor & coach emerging leaders
Manish Shah, MD & CEO of Godrej Capital, outlines his focus areas today and in the future:
Innovation will unlock India's Mission 'Atmanirbhar’
Sunita Handa is Chairman, Toyota FSIN and Principal Advisor & TLAB Chairman, Protectt.ai Labs. She shares her current activities and her deep insights on innovaiton in an interaction with Manoj Agrawal:
Algorithm is the Boss
Irem Sayeed, Chief Credit Officer at U GRO Capital, dwells into business focus and modernization at the lender:
Fintech and Neobank under the same Umbrella
It was started in 1902 to build what came to be called Israel:
Bajaj Allianz Revolutionizes Employee's HR and IT Experience with WhatsApp, MS Teams, Al and Automation
A productivity booster shot at BALIC:
Small Beginning for a Big Opportunity
AMU Leasing's focus on serving the underserved market of individuals and fleets looking for financing for electric 3-wheelers and 2-wheelers: