have not been 2 / 5 bis central bankers'speeches finalised, euro area banks are required to report leverage ratios. given the higher relative penalty given to holding sovereign bonds under the leverage ratio as opposed to the capital ratio, it is expected to increase the cost of banks ’ repo, and reduce incentives for money market arbitrage and market making. 2 reduced incentives for arbitrage and market making in turn affect market liquidity and can lead to greater periods of uncertainty. furthermore, since european banks are required to report average month - end positions, there are increasing signs of market stress at month - end dates. the leverage ratio contains provisions for netting of offsetting cash positions when they are with the same counterparty and settled through the same system. this has resulted in a much greater use of central counterparties ( ccps ). the use of ccps has been strongly supported by authorities and brings benefits in terms of smooth market functioning, as well as for individual institutions. eurosystem contacts report a wide difference in the pricing of trades cleared bilaterally and those cleared through ccps – sometimes in the tens of basis points. ccps, however, are also important for repo markets for a different reason. the increased volume of derivative trades centrally cleared at ccps due to new regulations such as emir, as well as sporadic bouts of volatility, means that those institutions tend to hold significant quantities of cash. placing that cash as unsecured deposits would represent wrong - way risk for ccps as the collapse of a significant financial institution would create significant market volatility at the same time as potentially the loss of some of the unsecured deposits. ccps are therefore increasingly large participants in the repo markets. the requirements for trades to be centrally cleared are still being introduced, so the demand from market infrastructure to exchange cash for collateral will rise. the rise in importance of ccps is indicative of the generally increasing role played by non - bank financial institutions in recent years. since these institutions do not hold accounts at the central bank, they are unable to access the deposit facility. the demand from these non - banks to find a secure place to deposit cash is a contributory factor to repo rates trading below the eurosystem ’ s deposit facility rate ( dfr ). last but not least, changes in the interbank lending market have led to increased collateral demand. in the period since the onset of the crisis, loan losses and weak profitability have constrained the availability of

current account surpluses are absorbed in the region itself. this process of demand generation would help in orderly correction of the global imbalances eighth, one wonders whether there is a dissonance between the perception of financial markets and that of the policy makers in regard to global imbalances. the policy makers appear to give some signals of concern, but the response of the financial markets is often out of alignment with the signals. interestingly, anecdotal evidence shows that analysts in financial intermediaries are sensitive to the downside risk of imbalances, but the conduct of the participants does not reflect the awareness. no doubt, this sense of dissonance is not new, as for example, stock markets went up after mr. alan greenspan ’ s statement regarding irrational exuberance. if such dissonance is true, and persists, what would be the effectiveness of public policy initiatives? ninth, is there an advantage in assessing the non - quantifiable factors to explain the persistence of what has been stated as a stable disequilibrium to describe the current status of the global economy? for example, signature value of united states in terms of confidence of financial markets as a lasting safe - haven status could be a factor, though the issue is whether it will be valid interminably. the perception of continuing productivity gains in the us due to its proven flexibilities could be another. lack of alternatives to deploy global savings, which are expanding may also be relevant. no doubt, these are not quantifiable, but do not cease to be relevant for analysis and assessment. finally, is it possible that there are several intermediate scenarios between orderly adjustments and disruptive or disorderly adjustments? a series of marginal adjustments, often in spurts, could take place which may appear random, but move towards gradual lessening of imbalances through an interactive and iterative processes encompassing markets, national policies and global cooperation. the agenda for analysis proposed here may facilitate exploration of such intermediate scenarios of unwinding global imbalances. conclusion to conclude, the performance of the indian economy since 1980, and in particular since the reforms in the 1990s, is in many ways an impressive success story both in terms of growth and stability. the indian economy has responded well to the rising global competition with gradually increasing integration with the world economy. the current high growth phase of the indian economy is also coinciding with rising domestic saving rates. while india by itself hardly contributes