National policies alone cannot prevent a crisis, concludes RBI’s International Research Conference

February 13, 2010: Give the known challenges, every central bank has to move in the direction of taking right steps that it may feel as appropriate despite lack of consensus on many critical issues, without waiting for the global system to move. It would be wrong, however, as noted by Mr. Stephen Roach, to presume that “best global policies are the sum of the best national policies”.

In a globalised world, national policies alone, despite being the most appropriate, cannot prevent a crisis unless some of the global challenges are addressed collectively at the global level. This was one prominent message that came out of the two-day conference, the Reserve Bank of India had organised... Read more

More than 50 international dignitaries, including seven Central Bank Governors, several Deputy Governors, academicians and eminent personalities from international financial organizations, such as, the IMF, the World Bank and the Bank for International Settlements participated in the conference.

In addition around 50 domestic experts including chairmen of nationalised banks, private banks and other financial institutions as well as eminent personalities from academics, financial sector and media also participated.

There were several other key messages from the conference. These were:

There was no consensus on the role of monetary policy for directly doing anything about asset prices and no one view was expressed on whether financial stability could be an explicit mandate of monetary policy.

LOLR and regulation were, however, generally seen as potential instruments to safeguard financial stability, though not enough.



There was no clear direction to resolve the impossible trinity, implying that countries have to adopt their own approach.

The need for macro-prudential regulation as an important, if not sufficient, next step was recognised. How financial innovations, with appropriate precautions, could contribute to high global growth, more particularly in emerging market and developing economies, was explained.

LOLR cannot solve insolvency problems was another key message.

The debate on what could be an appropriate Bagehot rule for the 21st century will continue.

It was also viewed that different dimensions of central bank independence may come under threat if high debt levels of the governments persist over protracted periods of time.

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