Kathmandu, Oct. 5:
Experts have suggested strengthening regulation of all
financial, capital as well as insurance sectors to ensure financial sector
stability in the country.
Banking, finance, capital market, insurance, saving
and credit cooperatives and non-banking financial institutions are interlinked
with each other and problems in any of these sector may result in the whole
financial sector crisis, they said at a workshop on ‘Financial Sector
Stability: A Priority for National Agenda’ organised here on Friday.
The experts also pointed towards the need for a
better and pragmatic coordination among the regulating agencies of these
diverse sectors to maintain financial health of the country.
Governor of the Nepal Rastra Bank (NRB) Dr.Chiranjibi
Nepal warned that the loosely regulated cooperatives, which mobilise deposits,
could be the biggest threat to the financial sector stability in the country.
“Saving and
deposit cooperatives and the non-banking financial institutions have posed
unseen risks to the financial sector stability in Nepal,” he said.
“The
monetary policy for the current fiscal year 2018/19 has introduced several
measures to strengthen the financial stability. Other financial institutions,
including saving and credit cooperatives are ‘unseen threats to the regulatory
system’,” he added.
However, he maintained that the regulatory system of
the banking sector was very strong and the central bank was strong and capable
to control bank and financial institutions.
According to Dr. Nepal, as more than 15 per cent of
the money in the financial market is mobilised by the institutions that are out
of the regulatory domain, and any shock could pose a threat to the entire
financial system of the country.
Strengthening the supervision and monitoring of
systemically important banks, branch audit of commercial banks, plan to develop
housing price index and raising the limit of deposit guarantee to Rs. 300,000
from Rs. 200,000, among others, are some of the measures were introduced in the
monetary policy as part of the efforts to strengthen the financial system of
the country.
Governor Dr. Nepal underlined the need of
consistency of the financial sector stability. “There should be consistency in
the stability of the financial sector. As observed in the 2008 financial crisis,
any incident can destabilise the system. So our focus should be on maintaining
consistency of the financial stability,” he added.
Experts, policy
makers and regulators also said that the financial stability was a pre-requisite
for economic growth and should not be taken as granted.
Chief of International Economic Cooperation
Coordination Division (IECCD) at the Ministry of Finance Shree Krishna Nepal
said that the financial stability was a pre-requisite to the economic growth of
any country.
“The global economy is moving towards normalcy and
there is not any upheaval. But what we can learn from the global financial
crisis is that if we cannot manage financial system, it can inflict damage on
the economy and we have to suffer,” he said.
Nepal said that the government had taken various
measures to make the financial system prudent, reliable and stable.
Bimal Koirala, Political Economy Advisor at UK Aid-funded
Financial Sector Stability Program, underscored the need for strengthening the
regulatory and supervisory capacity of regulatory bodies to maintain financial
stability of the country.
Former Deputy Governor of the NRB Krishna Bahadur Manandhar
said that the economy of the country should be analysed from the financial
sector stability.
He asked the regulators to be vigil as even the
well-regulated institutions could be vulnerable to crisis.
Nara BahadurThapa, the Research Department Chief of
the NRB, said that state-owned Rastriya Banijya Bank and Nepal Bank Ltd had threatened the
financial sector stability of the country in the past.
Stating that the government had to bail out these
banks through the tax payers’ money of Rs. 3.5 billion, he said that the crisis
also led to several reform initiatives in the financial sector.
Strahan Spencer, Senior Economic Adviser at DFID
Nepal, said that the firms and households were vulnerable to economic or
financial shocks.
“One of the important lessons from the global
financial crisis of 2008 is that we should not take financial stability as
granted,” he said, warning that sophisticated financial products could pose a risk
to the financial sector.
The programme was organised by Society of Economic
Journalists – Nepal (SEJON).
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