Guest guest Posted August 29, 2009 Report Share Posted August 29, 2009 RBI chief seeks more ethics from top brass Mail Today Mumbai, August 29, 2009 Comment Buzz up! Share Facebook! Digg it! Newsvine! Reddit! Del.icio.us! Technorati! StumbleUpon! RSS Feed A A A Email Print Buy article Drawing on the inherent difference between the financial sector, where trust is of utmost importance, and other businesses, the Reserve Bank of India (RBI) governor Duvvuri Subbarao said those running banks and financial institutions have a greater responsibility of being more ethical than those leading other businesses.Speaking on 'Ethics and the World of Finance' at Sri Satya Sai University at Puttaparthi in Andhra Pradesh, Subbarao said, "The (sub-prime) crisis has exposed an issue of moral hazard in the banking system - something that has come to be called privatisation of profit and socialisation of costs." He was referring to the bailout of failed banks with the help of public funds.Subbarao said that if, say, a soap manufacturing company became an astounding success, the company's shareholders and management would benefit. However, if it failed, the same people would lose."If banks make huge profits, they can reward themselves with generous pay packets and bonuses. And if loans sour and balance sheets crash, no worry, since the bank will be bailed out at the tax payers' expense," the governor added.This is true regardless of whether a large segment of the banking sector is owned by the government as in India, or whether the banks are privately owned as in most other countries, Subbarao pointed out. Governments, regardless of their political affiliations, can hardly afford large institutions to fail. This 'too big to fail' syndrome enables financial institutions to take risks that, say a soap manufacturer, cannot take, the governor said.Courtesy: Mail Today RBI chief seeks more ethics from top brass Drawing on the inherent difference between the financial sector, where trust is of utmost importance, and other businesses, the Reserve Bank of India (RBI) governor Duvvuri Subbarao said those running banks and financial institutions have a greater responsibility of being more ethical than those leading other businesses. Speaking on 'Ethics and the World of Finance' at Sri Satya Sai University at Puttaparthi in Andhra Pradesh, Subbarao said, "The (sub-prime) crisis has exposed an issue of moral hazard in the banking system - something that has come to be called privatisation of profit and socialisation of costs.." He was referring to the bailout of failed banks with the help of public funds. Subbarao said that if, say, a soap manufacturing company became an astounding success, the company's shareholders and management would benefit. However, if it failed, the same people would lose. "If banks make huge profits, they can reward themselves with generous pay packets and bonuses. And if loans sour and balance sheets crash, no worry, since the bank will be bailed out at the tax payers' expense," the governor added. This is true regardless of whether a large segment of the banking sector is owned by the government as in India, or whether the banks are privately owned as in most other countries, Subbarao pointed out. Governments, regardless of their political affiliations, can hardly afford large institutions to fail. This 'too big to fail' syndrome enables financial institutions to take risks that, say a soap manufacturer, cannot take, the governor said.. Courtesy: Mail Today sourced: http://indiatoday.intoday.in/index.php?option=com_content & task=view & issueid=110 & id=59042 & Itemid=1 & sectionid=110 RBI chief seeks more ethics from top brass Mail Today Mumbai, August 29, 2009 Comment Buzz up! Share Facebook! Digg it! Newsvine! Reddit! Del.icio.us! Technorati! StumbleUpon! RSS Feed A A A Email Print Buy article Drawing on the inherent difference between the financial sector, where trust is of utmost importance, and other businesses, the Reserve Bank of India (RBI) governor Duvvuri Subbarao said those running banks and financial institutions have a greater responsibility of being more ethical than those leading other businesses.Speaking on 'Ethics and the World of Finance' at Sri Satya Sai University at Puttaparthi in Andhra Pradesh, Subbarao said, "The (sub-prime) crisis has exposed an issue of moral hazard in the banking system - something that has come to be called privatisation of profit and socialisation of costs." He was referring to the bailout of failed banks with the help of public funds.Subbarao said that if, say, a soap manufacturing company became an astounding success, the company's shareholders and management would benefit. However, if it failed, the same people would lose."If banks make huge profits, they can reward themselves with generous pay packets and bonuses. And if loans sour and balance sheets crash, no worry, since the bank will be bailed out at the tax payers' expense," the governor added.This is true regardless of whether a large segment of the banking sector is owned by the government as in India, or whether the banks are privately owned as in most other countries, Subbarao pointed out. Governments, regardless of their political affiliations, can hardly afford large institutions to fail. This 'too big to fail' syndrome enables financial institutions to take risks that, say a soap manufacturer, cannot take, the governor said.Courtesy: Mail Today Send free SMS to your Friends on Mobile from your Messenger. Download Now! http://messenger./download.php Quote Link to comment Share on other sites More sharing options...
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