‘Effective regulation need of the hour in banking sector’

‘Effective regulation need of the hour in banking sector’

Context:

• Today, the banking sector needs effective regulation and supervision and not increased privatisation, as per the  group of prominent economists

Bank scams:

• The Punjab National Bank scam involved the second largest public sector bank.
• The reason was inadequate and faulty regulation and monitoring of the banking sector.

‘Curious turn’

• “This affects all banks, regardless of ownership. But in a curious turn, fraud that was led by and benefited private players pursuing super-profits at any cost is being made the reason for handing control of the nation’s savings to the private sector,”
• The poorly regulated private banks were even more prone to scams and failure, and that private profit orientation generated incentives for managements to exploit loopholes in rules and engage in risky behaviour, as shown by the U.S. and European bank behaviour leading up to the financial crisis of 2008-09.