International Events

Hony. Editor
Dr. Bindi Mehta
(Director, Research at ICSI - CCRT, Formerly, Chief economist, CRISIL)



 
International News-April, 2003
Basel 2 Beset With Controversies

Basel 2 with a new set of rules for bank capital are due to be applied latest by 2007 which means that these must be prescribed in the next couple of months to enable various regulators to move towards the new norms. However, there are controversies with a study by Mc Kinsey clearly indicating, inter alia, that retail credit is being apportioned undue risk weight and also that the norms will create different classes of banks. Such classes will appear due to the incentives/disincentives to move to Basel 2 norms from the current positions. It appears that the smaller banks and regional banks will be separated from the larger ones and those that have international presence. The Economist also points to the potential divergence between the American and European perspectives. It is believed that the American bankers and regulators have been at the forefront of the Basel 2. While the perspective of Americans appears to be on a segmented basis, the European regulators wish to see Basel 2, like Basel 1 as a global standard to be applied to all banks. The moves by the EU and the differences with the American perspective open the possibility of differences in the sets of rules between the two. The question would be the alternatives before developing countries like India, which have very few Banks that are internationally active.

 





 
 
Blowing Whistle on Corporate Fraud

According to Michael Kruzus, a Director in the Professional Standard Group with Grand Thorntons` Chicago office, the business failures in 2001 and 2002 are examples of what can happen when companies do not fully support effective whistle blowing policies and procedures. The Sarbanes – Oxley Act requires Board of Directors to create a confidential avenue for employees with appropriate protection against retaliation by the companies.

The SEC is expected to issue final rules on whistle blowing and protection by the end of April.

(Source: Web)
Corporate Governance in Banking in Russia

A survey by Corporate Governance in Russia indicates the absence of regulation and requirements from the bank of Russia as the most impeding factor for improving corporate governance in banking as 42% responded rated it as such. Other factors noted are: Lack of experience and knowledge in corporate governance (23%); imperfection of Criminal Law regarding the responsibilities of management (19%); and absence of resources for holding events aimed at improving corporate governance (12%); and absence of methodical material developed by Russian banking community ( 2%).

(Source: Web)




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US trade body calls for abolition of FII regime

The Investment Company Institute (ICI) of the US, the trade association representing over 8,000 American mutual funds, has appealed to the Securities and Exchange Board of India (SEBI) for abolition of the present FII regime and move towards what it calls “international investing norms”.

A ‘comment letter’ set by ICI last month to SEBI has advised that regulators to adopt a single, uniform system for reporting significant portfolio holdings, or, at a minimum, exempt MFs, pension funds and other institutional players that are not investing for control, from reporting under the takeover regulations.

ICI has further urged the Indian authorities to allow FIIs to participate in the futures segment on “equal terms with domestic institutional investors”.

(Source: the Business Line, March 27, 2003)

 

 

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© 2001 Academy of Corporate Governance