9 PM Daily Current Affairs Brief – May 12th, 2023

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Mains Oriented Articles

GS PAPER - 1

El Niño amid heating oceans: We’re now in uncharted waters

Source– The post is based on the article “El Niño amid heating oceans: We’re now in uncharted waters” published in the “mint” on 11th May 2023.

Syllabus: GS1- Geography. GS3- Environment

News– The latest spike in ocean temperature matters is a cause of concern.

What are the impacts of rising ocean temperatures?

Huge energy stored– The changes in sea-surface temperatures matters a lot when expressed as energy added to the system that includes our ocean and atmospheres. It is the equivalent of hundreds of millions of atomic bombs.

It’s energy that gets trapped in the system by an increasing concentration of greenhouse gases. That energy can manifest as heat waves or storms.

El-Nino and La-Nina cycles– La Niña has prevailed during the last three years. During this phase, trade winds push warm equatorial water westward from the US across the Pacific, where it piles up by Indonesia.

Every two to seven years, it switches to the El Niño pattern. Warmer water can shift back toward the Americas.

El Niño events can be gentle or fierce. It depends on whether strong westerly winds helps warm water to shift across the Pacific.

El Niño is born in the Eastern Pacific. But, the change in patterns redistributes heat around the planet. It disturbs the entire global atmospheric circulation.

The cycle of El Niño and La Niña has probably been going on for millions of years, since our continents and oceans reached their current configuration.

Now, with rapid overall warming, the Pacific cycle might become even stronger. It is already creating more extreme conditions.

Impact on ocean circulations– There’s more capacity for heat deep in the ocean. But, the water heats up at the surface first. Since cold water is heavier, it can create regions of stillness, where normal circulation stops and oxygen depleted oceans grow.

Scientists are observing alarming dead zones in the Gulf of Mexico, which are made worse by nitrate runoff from farms. It affects the phytoplankton, the zooplankton, the fish, the marine mammals and seabirds.

Warming oceans also lead to marine heat waves. It can destroy kelp forests and grasses that provided a home for fish and marine mammals.

Marriage for all, even if for a few

Source– The post is based on the article “Marriage for all, even if for a few” published in “The Hindu” on 12th May 2023.

Syllabus: GS1- Social issues. GS2- Polity

Relevance– Marriage rights for vulnerable communities

News – The Supreme Court began hearing the case for marriage equality within the ambit of the Special Marriage Act.

What are some facts about the parliamentary debate on the Special Marriage Act?

Member of Parliament, Vijaya Lakshmi Pandit, was one of the Bill’s proponents. She predicted that the law will not be supported by many but that the next generation would demand the right to choose their partners. The proposed law could improve the lives of women.

There was a perception among some Parliamentarians that allowing citizens to marry anyone of their choice could potentially lead to a collapse of society and civilisation. The Bill’s divorce provisions had raised fears of a proliferation of sexual desires.

Securing more rights for a large number of identities and desires can impose the ‘lifestyle’ of a few onto a majority that is not represented in these struggles.

Dr. Rajendra Prasad had bitterly opposed the Hindu Code Bill. As per him, the measure was forcing something on a vast majority, because a small, microscopic minority considered it a right.

What are issues with marriage equality for vulnerable sections of the population?

Indian polity and society still struggle with the idea of marriage reform and individual choice. Local and national politics have witnessed campaigns against inter-caste and inter-community couples.

Societal morality is given preference over rights afforded under the Act.

Vigilante groups have been empowered to prevent unions using extra-judicial methods. Queer couples may also face similar problems in future. Marriage is considered a social institution that upholds hierarchies based on gender, caste and community.

What is the way forward for marriage equality for vulnerable sections of the population?

Legal sanction may offer at least some relief. Social transformations are not easy. But, laws are unlikely to disrupt the lives of ‘vast majorities.

Some citizens may not be prepared for marriage equality. But law should have more potential than the public imagination. It should be aimed at improving the lives of the more marginalised.

Affording rights to a sexual minority reaffirms the rights of the citizenry as a whole.

GS PAPER - 2

The problem with India’s multi-alignment stand

Source– The post is based on the article “The problem with India’s multi-alignment stand” published in “The Hindu” on 12th May 2023.

Syllabus: GS2- International relations

Relevance– Ukraine issues and India stand

News– China’s recent mediation efforts to resolve the Ukraine crisis have once again spotlighted India’s approach to conflict resolution.

What has been the approach of China towards Ukraine use?

China has held the North Atlantic Treaty Organization’s eastward expansion responsible for instigating the war. As per China, America is the biggest obstacle to a ceasefire.

It is exploiting the differences among western countries regarding the extent of support to Ukraine. It is cementing the Beijing-Moscow relationship and ensuring the survival of the Vladimir Putin regime.

Thus, China has effectively positioned itself in opposition to the American approach. This is not how India views its role in resolving the conflict.

How is India’s position different from China?

In contrast to the Chinese President first outreach to the Ukraine, Mr. Modi has spoken to Mr. Zelenskyy many times.

In October and December last year, Mr. Modi had expressed India’s solidarity with Ukraine while extending support for peace efforts. Mr. Modi had publicly told Mr. Putin that “today’s era is not of war”.

Washington understands the importance of India’s continuous engagement with Ukraine. It is an important way of bringing New Delhi’s response to the Ukraine war into alignment with its own. The geopolitics of the Indo-Pacific and the Ukraine conflict are inter-connected.

The regular Modi-Zelenskyy interactions shows India’s rising stature and recognition of its unique position in the emerging global order. This is despite western criticism of India’s continued energy imports from Russia.

Ukraine’s Deputy Foreign Minister Emine remarked that “India wants to be the Vishwaguru, the global teacher and arbiter. Supporting Ukraine is the only right choice for true Vishwaguru.”

New Delhi has expressed its disapproval of the Ukraine war. But it has avoided taking a clear position in many UN resolutions on the issue.

What are nationalist ideas about Indian foreign policy?

Nationalist ideas have always influenced the Indian state. The choice of the ‘Vishwaguru’ is at the core of the present government’s nationalist foreign policy discourse.

Vishwa Guru image builds on historical trends in India’s political thought. It seeks to emphasise the distinctiveness of the country’s cultural ethos and civilisational values. It highlights the unique nature of ‘soft power’ in foreign policy debates.

India lacks hard power. If India had been adequately powerful, it would have stopped the Ukraine war. The Ukraine attack is being opposed. But nobody is ready to stop Russia because Russia has power.

This narrative assumes that a powerful Indian civilisational state will stand for global peace and stability.

What are the options for India?

The ambiguous position on Ukraine is not a better option for a nation aspiring to become a permanent member of the UNSC. It should have a commitment to speak as a global voice against territorial aggression and rights violations anywhere.

The normative pillars of the democratic, self-confident and morally superior Vishwa Guru identity cannot be identical to hegemon maximising its power at all costs.

Russian justifications are sometimes supported by China. India has no such revisionist motives. India’s views on sovereignty converges with a universally acceptable Westphalian notion. It is against the communist China’s political philosophy of ‘might is right’.

Ukraine is seen as a victim which is resisting aggression from an authoritarian neighbour. The Ukraine war alone is not sufficient to undermine India’s historical ties with Russia. It is based as much on New Delhi’s military dependence on Moscow and India’s strategic autonomy doctrine.

A pursuit of ‘multi-alignment’ may have given New Delhi some diplomatic space in the ongoing war in Ukraine.  However, it may not be sufficient for India to play the role of a mediator between Russia and Ukraine.

India currently lacks the material resources to match the extent of China’s economic and military potential.

Through his peace diplomacy, Mr. Xi’s primary aim is to discourage Mr. Zelenskiy to launch the much-discussed counteroffensive. It will increase Russia’s dependency on China.

Mr. Putin has done immense damage to Russia’s global standing and offended most of the democratic world.

Thus, the Modi government must ensure that India’s refusal to condemn Russian belligerence and continued increase in the import of Russian fuel is not interpreted as a pro-Moscow approach.

Marriage for all, even if for a few

Source– The post is based on the article “Marriage for all, even if for a few” published in “The Hindu” on 12th May 2023.

Syllabus: GS1- Social issues. GS2- Polity

Relevance– Marriage rights for vulnerable communities

News – The Supreme Court began hearing the case for marriage equality within the ambit of the Special Marriage Act.

What are some facts about the parliamentary debate on the Special Marriage Act?

Member of Parliament, Vijaya Lakshmi Pandit, was one of the Bill’s proponents. She predicted that the law will not be supported by many but that the next generation would demand the right to choose their partners. The proposed law could improve the lives of women.

There was a perception among some Parliamentarians that allowing citizens to marry anyone of their choice could potentially lead to a collapse of society and civilisation. The Bill’s divorce provisions had raised fears of a proliferation of sexual desires.

Securing more rights for a large number of identities and desires can impose the ‘lifestyle’ of a few onto a majority that is not represented in these struggles.

Dr. Rajendra Prasad had bitterly opposed the Hindu Code Bill. As per him, the measure was forcing something on a vast majority, because a small, microscopic minority considered it a right.

What are issues with marriage equality for vulnerable sections of the population?

Indian polity and society still struggle with the idea of marriage reform and individual choice. Local and national politics have witnessed campaigns against inter-caste and inter-community couples.

Societal morality is given preference over rights afforded under the Act.

Vigilante groups have been empowered to prevent unions using extra-judicial methods. Queer couples may also face similar problems in future. Marriage is considered a social institution that upholds hierarchies based on gender, caste and community.

What is the way forward for marriage equality for vulnerable sections of the population?

Legal sanction may offer at least some relief. Social transformations are not easy. But, laws are unlikely to disrupt the lives of ‘vast majorities.

Some citizens may not be prepared for marriage equality. But law should have more potential than the public imagination. It should be aimed at improving the lives of the more marginalised.

Affording rights to a sexual minority reaffirms the rights of the citizenry as a whole.

SC verdict on Maharashtra political crisis: The apex court draws red lines

Source: The post is based on the following articles

“SC verdict on Maharashtra political crisis: The apex court draws red lines” published in the Indian Express on 12th May 2023.

“Mumbai Message – Shinde survives. But SC makes clear party has primacy over legislative wing – big implications” published in the Indian Express on 12th May 2023.

Syllabus: GS – 2: issues and challenges pertaining to the federal structure.

Relevance: About Supreme Court verdict on the Shiv Sena case.

News: The Supreme Court recently held that the then Maharashtra Governor’s call for a trust vote, which led to the resignation of the Uddhav Thackeray government last June, was illegal.

About the Supreme Court verdict on the Shiv Sena case

Must Read: Supreme Court verdict on the Shiv Sena case

What are the significances of the SC verdict on the Shiv Sena case?

Clearly defined the boundaries of state machinery: The judgement marked the boundaries of the three constitutional arms of the state machinery, namely governors, the Election Commission and presiding officers of legislatures.

Limited the involvement of Governor and Speaker in power games: The role played by Governor and Speaker proved decisive in the power game. The court said that the Governor is not empowered to enter the political arena and play a role in inter or intra-party disputes and also clarified that the floor test is not the platform to resolve intraparty disputes. Similarly, the court said that the Speaker must recognise only the whip and leader who are duly recognised by the political party. This will make the hostile takeover of state governments with active gubernatorial support will be difficult in future.

Provide greater protection to political parties: The court held that the whip on voting represents the will of the party and not its legislators. It’s the party that appoints its whip and the house leader. This means political parties now have a greater degree of protection against defection by legislators.

Utilised the constitutional principles effectively: The SC has used the Constitution’s tenth schedule – meant to prevent opportunistic defections – as the reference point to reach its conclusions. The most important conclusion is that a political party is superior to its legislative wing.

Supreme Court ruling on administrative services in Delhi – Explained, pointwise

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Introduction

The Supreme Court of India, in a significant ruling, has affirmed the elected Delhi government’s control over administrative services in the National Capital Territory of Delhi (NCTD). The judgment clarifies a long-standing dispute between the Delhi government and the Centre, determining that the Lieutenant Governor (LG) of Delhi is bound by the advice of the Delhi government council in matters of legislative scope. The decision is expected to reshape the dynamics of governance in the capital, making officers more accountable to the elected government. However, ambiguity remained due to the presence of the National Capital Territory of Delhi (Amendment) Act, 2021.  

What are the issues with the functioning of administrative services in Delhi?

Control over Administrative Services: One of the central issues has been the control over administrative services, such as the Indian Administrative Service (IAS). There has been a power tussle between the elected Delhi government and the Central government appointed LG over who holds the authority over these services. This tussle has often led to a deadlock in decision-making, affecting the smooth functioning of the administration. For example, the Delhi government’s proposal for doorstep delivery of rations was stalled due to disagreement with the LG over who had the final say in implementing such policies.  

Division of Powers: The Delhi government does not have full statehood and thus does not have complete control over the police, land, and public order. This division of powers has created operational issues. The Delhi government has often complained that it has limited powers to execute its policies effectively.  

Legislative Ambiguity: The lack of clarity in the legislative text about the distribution of powers between the Delhi government and the LG has also created problems in the administration. The ambiguity in the reading of Article 239AA of the Constitution, which outlines the powers of the Delhi government, has often resulted in disagreements.  

Political Differences: Political differences between the elected Delhi government and the Central government have also been a cause for administrative issues. When the two are led by different political parties, as has often been the case, conflicts tend to arise.  

The National Capital Territory of Delhi (Amendment) Act, 2021: This Act passed by the Central government gave more powers to the LG, leading to power tussle and confusion over decision-making in Delhi’s administration.  

Read more: NCT of Delhi (Amendment) Bill, 2021 is against the Principle of Federalism

What are the viewpoints of the Centre and Delhi government regarding the administrative services in Delhi?

Centre’s Viewpoint on Administrative Services in Delhi  

Necessary to have control over administrative services: The Centre has consistently maintained that Delhi, being the national capital, holds a special status that necessitates the Union having control over administrative services. The Centre argues that the absence of this control would impede its ability to discharge its national and international responsibilities effectively.  

Delhi’s ministers have adequate powers: The Centre also argues that the Delhi government already has sufficient control over the bureaucracy through the Transaction of Business Rules, 1993, which grants Delhi’s ministers adequate powers to ensure supervisory and functional control over civil services.  

Delhi’s status as a Union Territory: The Centre further claims that the LG should retain considerable power due to Delhi’s status as a Union Territory. The 2021 National Capital Territory of Delhi (Amendment) Act supports this viewpoint by giving the L-G more powers.  

Delhi Government’s Viewpoint on Administrative Services in Delhi  

Need power to implement their policies: The Delhi government, argue that as an elected government, they should have the power to implement their policies effectively and hold civil servants accountable.  

Article 239AA : They have contested the Centre’s interpretation of the Constitution, stating that Article 239AA gives the Delhi government legislative and executive powers similar to other states, excluding matters of public order, police, and land.  

2021 Amendment Act- overreach by the Centre: The Delhi government has also contested the 2021 Amendment Act, viewing it as an overreach by the Centre into the administrative affairs of Delhi, and an attempt to undermine the powers of the democratically elected government.  

Limiting LG power: They believe that the LG should act on the ‘aid and advice’ of the Council of Ministers, as per the 2018 Supreme Court ruling, and that the L-G’s power should not extend to matters within the legislative assembly’s scope.  

Read more: GNCT of Delhi Amendment Bill 2021 and Supreme Court’s Verdict

About SC ruling on administrative services in Delhi

Supreme Court ruling on administrative services in Delhi
Source: Hindustan Times

Supreme Court’s Ruling on Control of Services: The Supreme Court has ruled that the Delhi government has legislative and executive power over all administrative services in the national capital, except those related to land, law and order, and the police. This means that the elected government in Delhi can now control the bureaucracy and hold civil servants accountable.  

Impact on the 2015 Notification: The ruling partially overturns a 2015 notification by the Ministry of Home Affairs, which had given control of all services to the LG. This means the LG can no longer exercise unilateral control over all services.  

Role of the LG: The court has reiterated that the LG is bound by the aid and advice of the Delhi government’s council of ministers in matters within the legislative scope of the NCT).  

Enhancement of Democracy and Federalism: The ruling upholds the principles of democracy and federalism by emphasizing the importance of elected governments and their role in serving the needs of their electorate.  

Read more: The Government of National Capital Territory of Delhi (Amendment) Act, 2021

What is the extent of the Delhi government’s powers on administrative services?

The Delhi government has legislative and executive power over all administrative services in the NCTD, as per the Supreme Court’s ruling. However, this power doesn’t extend to matters related to land, law and order, and the police, which remain under the exclusive domain of the Centre. Here’s what this means in more detail:  

Control Over Bureaucrats: The Delhi government now has control over bureaucrats, including the Indian Administrative Service (IAS) officers serving in Delhi, and can hold them accountable for their performance. This includes powers over transfers, postings, and appraisals of these officers.  

Policy Implementation: The elected government has the authority to direct civil servants in the implementation of its policies. This means that government schemes and initiatives can be executed more effectively.   

What are the implications of the SC ruling on administrative services in Delhi?

Supreme Court ruling on administrative services in Delhi
Source: Hindustan Times

Empowerment of the Elected Government: The ruling affirms the power of the elected government in Delhi, enabling it to exercise greater control over the bureaucracy. This should, in theory, allow for more efficient and responsive governance, as the government can directly hold officials accountable.  

Greater accountability of officials: With the elected government having control over administrative services, officials are expected to be more answerable to the government. This could lead to increased accountability and, potentially, better public service delivery.  

Potential for improved policy implementation: The elected government’s increased control over administrative services could lead to more effective implementation of its policies and schemes, as it now has the power to direct and manage the civil servants responsible for executing these initiatives.  

Continued legal and political debates: Despite the clarity provided by the Supreme Court’s ruling, the power dynamics between the Delhi government, the Lieutenant Governor, and the Central Government may continue to be a subject of legal and political contention, especially given the National Capital Territory of Delhi (Amendment) Act 2021 which gives more powers to the LG.  

Boost to Federalism: By affirming the powers of the elected government in Delhi, the ruling strengthens the principle of federalism in India. It balances the power between the Centre and the states (or in this case, Union Territory), thereby upholding the spirit of cooperative federalism.  

Precedent for Other Union Territories: While the ruling is specific to Delhi, it could set a precedent for other Union Territories with legislative assemblies, like Puducherry, potentially leading to a reassessment of the Centre-UT power dynamics.  

Read more: The NCT of Delhi Act, 2021 Enhances Cooperative Federalism

What should be done?

Effective Implementation of the Ruling: All relevant parties, including the Delhi government, the Lieutenant Governor, and the Central Government, should respect and implement the Supreme Court’s ruling. This includes empowering the elected government in Delhi to exercise its authority over administrative services.  

Cooperative Governance: The Delhi government, the Lieutenant Governor, and the Central Government should work cooperatively to ensure smooth and efficient governance in the National Capital Territory. This includes respecting each other’s roles and responsibilities as defined by the Constitution and the Supreme Court’s ruling.  

Clarification of the NCT of Delhi (Amendment) Act, 2021: Given the potential for conflict between the Supreme Court’s ruling and the provisions of the National Capital Territory of Delhi (Amendment) Act, 2021, further legal clarification may be needed. This could be pursued through the courts or potentially through legislative amendments.  

Increased Accountability Measures: With the elected government in Delhi now having greater control over administrative services, it should implement robust accountability measures to ensure that civil servants are effectively serving the public interest.  

Ongoing Review: The implementation and impact of this ruling should be reviewed on an ongoing basis to ensure that it is promoting effective and accountable governance in the National Capital Territory of Delhi. 

Sources: Indian Express (Article 1, Article 2 and Article 3), The Hindu (Article 1 and Article 2), Hindustan Times, Times of India and South Asian Voice

Syllabus: GS 2: Indian Constitution and Polity: Issues and challenges pertaining to the federal structure.

GS PAPER - 3

Global investors need Indian tax carrots and not uncertainty sticks

Source: The post is based on the article “Global investors need Indian tax carrots and not uncertainty sticks” published in Mint on 12th May 2023.

Syllabus: GS 3 – Economy

Relevance: About global minimum tax rate

News: Multinational companies often try to minimize their tax burden by incorporating themselves in tax havens. The article explains the steps taken globally to address the issue of tax evasion by MNCs.

What steps have been taken by countries to address the tax evasion by MNCs?

Click Here to Read

How has global minimum tax rate evolved?

Read Here: Global Minimum Corporate Tax and India – Explained and India needs to be cautious before joining Global Minimum Tax rate

Moreover, public scrutiny, enabled by increased tax transparency obligations, is putting pressure on companies to act with more social responsibility as part of their ESG obligations.

How is India taking steps towards imposing a global minimum tax rate and how will it benefit India?

India has set an international tax agenda in its current G20 presidency.

Although many countries have implemented the 15% global minimum tax, the negotiations on a fairer distribution of taxing rights (Pillar 1) are expected to conclude under the Indian G20 presidency.

Pillar 1 will allocate more taxing rights to market jurisdictions such as India. It will also provide for more tax certainty to businesses.

Tax certainty is about being guaranteed a fair and predictable tax treatment based on the rule of law. It is also about companies being guaranteed a proper resolution of tax disputes, including through compulsory mechanisms.

What is the way ahead for India?

India despite having brightest tax experts in the world, suffers from a negative reputation for the practices of its tax administration.

There has been progress to improve international dispute resolution. However, a lot remains to be done to foster growth and investments.

Moreover, implementing Pillar 2 of the global tax framework will remove the tool of tax incentives and help in attracting investments in India.

However, India does not need tax incentives to attract investments because it is the largest fast-growing market in the world, rather it needs tax certainty. India should make tax certainty its top priority.

SC directions to benefit electricity consumers

Source: The post is based on the article “SC directions to benefit electricity consumers” published in Business Standard on 12th May 2023.

Syllabus: GS 3 – Infrastructure

Relevance: concerns with discoms

News: Discoms suffer loss and are mostly involved in litigations. Despite various compliance requirements, discoms continue to be a drag on the economy. SC has recently given judgment through its own observations in one of the litigations.

What has been the judgment of the Supreme Court regarding discoms?

Following observation have been made by SC in GMR Warora Energy Ltd versus Central Electricity Regulatory Commission and Others:

First, the court has said that the power purchase agreement itself provides a mechanism for payment of compensation on the grounds of change in law. In such a case, unwarranted litigation should be avoided.

The Court further emphasised that “change in law” events must begin to take place on the day on which regulations, orders, and notices are issued by state agencies.

Second, according to the SC, appeals under Section 125 of the Electricity Act of 2003 are only permitted on any of the grounds listed in Section 100 of the Code of Civil Procedure, 1908. This means that appeal to the SC can only be made on substantial questions of law.

As per SC, discoms shouldn’t appeal in matters when the Electricity Regulatory Commissions and the Appellate Tribunal for Electricity (APTEL) had issued appropriate rulings. This, however, undermines the purpose of The Electricity Act of 2003.

Third, the SC directed the Ministry of Power to evolve a mechanism such that once the first order is received from a state or Central Regulatory Commission, discoms should first make the payment to generating companies. This will prevent the burden of carrying cost on the end consumers.

The court said that discoms can exercise their right to appeal against the order after making payments to generating companies.

However, discoms usually get involved into litigation which delays the payments and they also end up paying a late payment surcharge (LPS).

SC said that in such a scenario, concerned discoms shall not be allowed to pass on LPS /carrying cost to the end consumers.

Fourth, the court ruled that discoms are the root cause of massive financial stress across the power chain, thereby impacting the orderly growth of the economy.

There are clear directions from the Central Electricity Regulatory Commission, Ministry of Power and even various Parliamentary Committees to make timely payments to generating companies.

Despite this, discoms get involved into multiple litigations which results in LPS. This burden is ultimately passed on to the end consumers.

Fifth, the court raised concerns about claims made by the discoms’ counsel that the cost of buying electricity from independent power producers is significantly less than buying it from state-owned power plants.

Must Read: DISCOM sector in India: Challenges & solutions – Explained

What can be summarized from the above rulings?

The judgments may be summarized that the SC insisted the Union of India, through the Ministry of Power, to evolve a mechanism to avoid unnecessary and unwarranted litigation, the cost of which is also passed on to the end consumer.

Anatomy of a bank failure

Source– The post is based on the article “Anatomy of a bank failure” published in the “Business Standard” on 12th May 2023.

Syllabus: GS3- Economy

Relevance- Issues related to banking sector

News– Silicon Valley Bank (SVB) and its holding company, Silicon Valley Bank Financial Group (SVBFG), failed last March. This resulted in the failure of Signature Bank and, First Republic Bank.

How management and board failures were responsible for this crisis?

SVBFG’s assets tripled in size between 2019 and 2021. The technology sector was booming, so lending expanded rapidly.

Any abnormal growth in loans can cause trouble for bank. Management does not have the bandwidth to assess risk properly.

Reliance on volatile wholesale deposits tends to increase. Managerial incentives are often linked to profits without adjusting for risk. For CEOs, the temptation to quickly grow the loan book is irresistible.

The onus is on the board of directors to take actions. But Boards supports CEOs who show good performance for a few years.

At SVBFG, the board was not even responsive to supervisory warnings. As per FRB report, the board put short-run profits above effective risk management. It treated resolution of supervisory issues as a compliance exercise rather than a critical risk-management issue.

Since July 2022, SVBFG has failed its liquidity stress tests repeatedly. Management Did not necessary actions were not executed until March 2023.

Interest rate risk too was poorly managed. The bank had crossed its interest rate risk limits since 2017.

What are the supervisory failures responsible for this crisis?

There were supervisory failures also. For governance, SVBFG got a “Satisfactory” rating, despite repeated supervisory observations about inadequate oversight.

The bank had large, uninsured deposits, yet managed a “Strong” rating on liquidity. Despite breaching interest rate risk limits repeatedly, it got a “Satisfactory” rating on the item.

How weak regulatory oversight is responsible for this crisis?

The report says joint oversight by the FRB and the 12 Federal Reserve Banks is a factor. The Board delegates authority to the Reserve Banks. But, Bank supervisors look to the FRB for approval before making a rating change. Getting a consensus is time-consuming.

The philosophy of “light touch” regulation and supervision is an issue. Multiple regulators and supervisors are another problem.

There is also the “revolving door” syndrome. The regulators join private banks, then jump back to the regulator in a senior capacity. The relationship between regulators and banks is cause of concern.

How can RBI improve the regulatory and supervisory oversight over banks?

The RBI is better in regulatory and supervisory capacity than its counterparts in the West. Its intrusive approach is a better safeguard for banking stability than the light touch regulations. However, supervision can only be a third layer of defence against bank instability. Regulations are the primary layer, followed by the board.

The RBI must find ways to get bank boards to do a far better job. A radical change would be to alter the way independent directors are appointed at banks.

At present, the promoter or CEO has the dominant say in the appointment of independent directors.

One independent director may be chosen by institutional investors and another by retail shareholders from a list of names proposed by the Financial Services Institutions Bureau.

Until there are independent directors who are distanced from the promoter and management, it’s unrealistic to expect board oversight to improve.

El Niño amid heating oceans: We’re now in uncharted waters

Source– The post is based on the article “El Niño amid heating oceans: We’re now in uncharted waters” published in the “mint” on 11th May 2023.

Syllabus: GS1- Geography. GS3- Environment

News– The latest spike in ocean temperature matters is a cause of concern.

What are the impacts of rising ocean temperatures?

Huge energy stored– The changes in sea-surface temperatures matters a lot when expressed as energy added to the system that includes our ocean and atmospheres. It is the equivalent of hundreds of millions of atomic bombs.

It’s energy that gets trapped in the system by an increasing concentration of greenhouse gases. That energy can manifest as heat waves or storms.

El-Nino and La-Nina cycles– La Niña has prevailed during the last three years. During this phase, trade winds push warm equatorial water westward from the US across the Pacific, where it piles up by Indonesia.

Every two to seven years, it switches to the El Niño pattern. Warmer water can shift back toward the Americas.

El Niño events can be gentle or fierce. It depends on whether strong westerly winds helps warm water to shift across the Pacific.

El Niño is born in the Eastern Pacific. But, the change in patterns redistributes heat around the planet. It disturbs the entire global atmospheric circulation.

The cycle of El Niño and La Niña has probably been going on for millions of years, since our continents and oceans reached their current configuration.

Now, with rapid overall warming, the Pacific cycle might become even stronger. It is already creating more extreme conditions.

Impact on ocean circulations– There’s more capacity for heat deep in the ocean. But, the water heats up at the surface first. Since cold water is heavier, it can create regions of stillness, where normal circulation stops and oxygen depleted oceans grow.

Scientists are observing alarming dead zones in the Gulf of Mexico, which are made worse by nitrate runoff from farms. It affects the phytoplankton, the zooplankton, the fish, the marine mammals and seabirds.

Warming oceans also lead to marine heat waves. It can destroy kelp forests and grasses that provided a home for fish and marine mammals.

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