Archive for June 8th, 2022

Why India needs a Fiscal Council?

June 8, 2022

Lekha Chakraborty of NIPFP and Emmanuel Thomas of JNU in this blogpost reiterate a long standing demand of economists: Need for a Fiscal Council in India:

…an earlier than expected fiscal normalisation process by drastically curbing public debt can affect growth recovery. So strengthening the credibility of fiscal policy is significant to ensure fiscal marksmanship. ‘Communication’ of the medium-term fiscal framework by providing the roadmap to reduce the public debt is important to gain investors’ confidence. Fiscal transparency and accountability need to be ensured to create room for market confidence in a high public debt regime. Constituting a Fiscal Council in India is therefore crucial at this juncture to analyse the fiscal risks and to formulate post-pandemic fiscal strategies to ensure fiscal credibility in times of geopolitical uncertainties. 

Posted in Discussion, Indian Economy/Financial Markets | 1 Comment »

Regulating, Supervising, and Handling Distress in Public Banks

June 8, 2022
IMF economists in a new paper:

This paper highlights the distinct challenges and suggests practical solutions to the effective regulation, supervision, and crisis management for public banks. It acknowledges that public banks exist for variety of reasons (legacy, ideology, public policy) and will likely remain a feature of financial systems in a number of countries. On this basis, it provides advice on how to best incorporate public banks in the regulatory paradigm commensurate with their risk profiles.

Lots of interesting graphs and data in the paper on public banks. Helps compare public sector banking across the world.

Some interesting points:

  • Globally public banks’ assets share declined from 20% to 14% between 1999 and 2008. There was a slight rise during global financial crisis to 16% due to nationalizations and recapitalizations.
  • Public banks gained market share in advanced economies with the impact of the GFC. In emerging market and developing economies public banks exhibit downward trend.
  • Asia and the Pacific has the highest share of public banks followed by Europe. Since 1999, the share of public banks’ assets has declined across most regions.
  • Among advanced economies, only Iceland has public banks with more than 50 percent of banking sector assets.
  • Public banks dominate the banking industry in some emerging market and developing economies (Belarus, Bhutan, India, Russian Federation, Ukraine).

In 2016, India has the highest share in terms of highest percentage of Public Bank’s Assets (68%). In 2009, Belarus share of Public bank assets was highest at 80% plus and has declined to 65%.

Posted in Academic research & research papers, Central Banks / Monetary Policy, Economics - macro, micro etc, Financial Markets/ Finance | 1 Comment »

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