deepak mohanty : statistics and the reserve bank – recent developments and perspective opening remarks by mr deepak mohanty, executive director of the reserve bank of india, at the annual statistics conference 2013 of the reserve bank of india, mumbai, 22 march 2013. * * * 1. deputy governor, dr. urjit r. patel, shri a. b. chakraborty, officer - in - charge, department of statistics and information management ( dsim ) ; heads of select central office departments ; distinguished statisticians and economists from the academia ; and friends. i extend a warm welcome to you all to the annual statistics conference 2013, organized by dsim. this conference provides a platform to the officers of dsim to present their research work before the experts and receive their feedback in order to make the analysis more meaningful for policy and research. i thank the distinguished professors who have consented to discuss various papers prepared by my colleagues in dsim : prof. manoj panda ( director, institute of economic growth, delhi ), prof. n. r. bhanumurthy ( nipfp, new delhi ), prof. tathagata bandyopadhya ( iim, ahmedabad ), prof. rajendra vaidya ( igidr, mumbai ), prof. chetan ghate ( isi / icrier delhi ), prof. pulak ghosh ( iim, bangalore ), prof. t. v. ramanathan ( pune university ). you all bring together plenty of expertise and experience in the field of theory and practice of statistical research for economic policy making which is of great value to us. 2. i have said it earlier that statistics is a public good. as a central bank, we are responsible for generating various macro - financial statistics collected both from primary and secondary sources in the process of implementing our policies. we use statistics and statistical tools extensively to aid informed policy making. therefore, a solid statistical grounding and soiling the hands with data are basic prerequisites for the making of a good empirical economist. this is evident from the presence of many eminent economists amongst us in this conference. 3. let me recapitulate briefly about the outcome of the 2012 conference in the context of major developments that took place in the statistical activities during last one year. in the last year ’ s conference, dsim researchers presented 12 technical papers. subsequently these papers were revised based on the feedback received from the external experts.

. the various financial crisis of the past brought to the fore the importance of robust risk management practices in financial institutions including banks. progressive technological developments and advanced modelling techniques have, however, rendered risk management a highly complex and sophisticated discipline lately. what is risk management? 6. risk management can be defined as a function of risk identification, measurement, monitoring and reporting to ensure that the returns are appropriate to the risk undertaken and the risks undertaken are commensurate with the risk appetite and risk tolerance. risk management has to ensure that the bank holds adequate capital and reserves to make sure that its solvency and stability are not threatened, both in the short and the long run. 7. the capital measurement standards commonly known as the basel accords i and ii published in 1988 and 2006 respectively, had already emphasized the importance of risk bis central bankers ’ speeches management by linking progressively the banks ’ capital adequacy to the risk weighted assets ( rwa ) on account of the credit and rwa equivalent for market and operational risks. based on the principle of proportionality, basel ii further entails progressive advancement to sophisticated but complex risk measurement and management approaches to credit, market and operational risks depending on the size, sophistication and complexity of the respective banks. in addition, pillar 2 and pillar 3 of basel ii emphasize the need for developing better risk management techniques in monitoring and managing risks not adequately covered or quantifiable under pillar 1 and increased disclosure requirements. recent global initiatives for strengthening risk management practices in banks 8. as a response to the global financial crisis, a package of reforms collectively referred to as basel iii has been unleashed as part of the global regulatory effort to enhance the soundness and resilience of the banking system. these reforms focus on capital, liquidity, leverage and macro prudential aspects of banking risk management. basel iii, on one hand, attempts to improve the quality and quantity of loss absorbing capital that a bank holds and aims at increasing the risk coverage of the capital framework, in particular for trading activities, securitisations exposures to off - balance sheet vehicles and counterparty credit exposures arising out of derivatives. on the other hand, it has devised regulation for dealing with systemic risk by prescribing countercyclical capital requirement, to contain pro - cyclicality and a framework for g - sibs and d - sibs has also been laid down to manage risks arising from inter - connectedness. 9. the reforms require banks to raise