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Document Type

Conference Paper

Publication Date

10-6-2005

Conference Name

International Conference on “Global Banking: Paradigm Shift

Conference Location

Mumbai

Conference Dates

October 6, 2005

Series

Faculty Research - Book Chapters and Conference Papers

First Page

1

Last Page

7

Keywords

Globalization, Banking, Regulatory issues

Abstract / Description

New Regulatory issues can arise either from the changing nature of domestic financial system or due to the challenges arising from globalization and financial integration across borders. In Pakistan, for example, there has been a major shift in the ownership and management of the banking sector from a predominantly public sector to the private sector. As a result of restructuring and privatization, 80 per cent of the assets of the banking system are at present in the hands of the private sector. There has also been a simultaneous shift from a direct and administered system to market determined and marked based interest rates, exchange rates and other key price variables. This change in the landscape domestically has imposed new burden on the regulators. As the new private owners and managers of the banks have limited stakes of their own, they can take excessive risks with depositors’ money. The upside potential from this excessive risk taking will be appropriated solely by the owners and the managers in form of higher than average returns and performance bonuses, but, the downside risks will fall upon the shoulders of the depositors. The regulator has thus to remain vigilant all the time to ensure that the private owners and management of the banks do operate within the defined risk parameters, observe the standards, guidelines and codes diligently, comply with prudential regulations and norms, follow the best corporate governance practices and do not deviate from the instructions given from time to time.

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