The Global Financial Crisis (GFC) of 2008-09 wreaked havoc on various jurisdictions, but sprang up good lessons for the future as well. It gave meaning to a concept called Systemic Risk and its ramifications on management of crisis in the financial space. Need-oriented dynamic regulations and intensive off-site supervision were missed a lot. The misuse of innovative instruments like Securitization & Credit Derivatives to satisfy the thirst for higher returns were remembered. A menu of recipes was lined up based on the fault-lines noticed. 

A host of reforms in the areas of Financial Regulation & Supervision were undertaken during the last decade. Higher quality capital and good quantity of availability of liquidity at hand remained the focus to safeguard solvency risk. Macroprudential tools were conceived to address systemic risk while complementing to the monetary policy tools of short-term interest rates to take care of volatilities in the economic system. Developing self-resilience has been the biggest prescription to contain the severity of future financial crisis. Smelling potential distress brewing in the system well in advance could be the best possible solution.

Development of effective Early Warning Mechanisms (EWMs) and juxtaposing their signals into a meaningful Stress Tests Program (STP) are seen to be quite useful in this direction. Codification of a Crisis Management Framework (CMF) covering steps to manage liquidity hemorrhage in the short-run to resolve insolvent firms in the long-run is a prerequisite. Spill-over effects of monetary and financial stability policies across the jurisdictions is calling for an architecture of international coordination to stave off volatilities in the international financial space.

About Our Expert
		A central banker for 35+ years, Dr. Rabi N. Mishra was the Executive Director at RBI, India’s Central bank until August  2020. In this capacity, he looked after the areas of Supervision (and SupTech) of banks, Urban Cooperative Banks & Non-Banking Financial Companies in India. Earlier he held the positions of the Head of Risk Monitoring, Financial Stability, and the Training Institute of RBI.  Having worked as a member on the Boards of banks in India and a few committees of the Financial Stability Board, Dr. Mishra has had the opportunity to work closely with the IMF and the BIS. He helped set up the Macro-Financial Surveillance Architecture for India as well as Oman.  Dr. Mishra has a PhD in Economics and had a stint as a Post-Doctoral research fellow at the Economics Department of Harvard University. His professional expertise hinges on Macroeconomic Policy issues, Regulation/Supervision, Financial Crisis Resolution, Macro-Financial Surveillance, and Risk Management. Dr. Mishra is the author of the book, SYSTEMIC RISK & MACROPRUDENTIAL REGULATIONS –The Global Financial Crisis and Thereafter.

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