given the risks to financial stability, governments in advanced economies had to bail out their largest banks and financial institutions. the notion that markets will take care of weaknesses has once again been proven wrong. so far, the focus of banking regulation globally has been on capital adequacy. as this crisis has shown, liquidity issues are equally important and it is appropriate to note that, in india, we have focussed our attention on these issues as well. given the complex inter - linkages between banks and non - banks and the move towards conglomerates, it is important that regulatory arbitrage loopholes are fixed to avoid regulatory arbitrage. it is in this context that we have tightened the regulatory regime in regard to nbfcs over the past few years in a phased manner. it is, therefore, important that banks and other financial sector players are well - regulated, while permitting them the necessary flexibility to grow and expand and meet the financing needs of a growing economy. a host of other issues such as accounting, auditing and compensation have also received attention in the aftermath of the global financial crisis. all these issues are engaging the active attention of policymakers and academics alike around the world ( g - 20, 2009 ). in view of the fast pace of technological and financial innovations, regulatory authorities would have to follow an approach that would have to be dynamic and adjust in response to changing economic environment. references bernanke, ben ( 2009 ), “ the crisis and the policy response ”, stamp lecture at london school of economics, january 13. available at http : / / www. federalreserve. gov / newsevents / speech / bernanke20090113a. htm committee on the global financial system ( 2009 ), report of the working group on capital flows to emerging market economies ( chairman : rakesh mohan ), bank for international settlements, basel. federal reserve bank of st. louis ( 2009 ), monetary trends, april. group of thirty ( 2009 ), “ financial reform : a framework for financial stability ” ( chairman : paul a. volcker ), washington d. c. geneva report ( 2009 ), “ the fundamental principles of financial regulation ”, geneva reports on the world economy 11 ( by markus brunnermeier, andrew crocket, charles goodhart, avinash d. persaud and hyun shin ). g - 20 ( 2009 ), “ working group on enhancing sound regulation and strengthening transparency (

co - chairs : tiff macklem and rakesh mohan ). haldane, andrew ( 2009 ), “ why banks failed the stress test? ”, bank of england. henry, peter blair ( 2007 ), “ capital account liberalization : theory, evidence, and speculation ”, journal of economic literature, vol. xlv, december. international monetary fund ( 2009a ), “ group of twenty : note by the staff of international monetary fund ”, january. - - - - - - ( 2009b ), “ initial lessons of the crisis ”, february. - - - - - ( 2009c ), world economic outlook database, april. kohn, donald ( 2008 ), “ monetary policy and asset prices revisited ”, remarks at the cato institute's 26th annual monetary policy conference, november 19. available at http : / / www. federalreserve. gov / newsevents / speech / kohn20081119a. htm lane, philip ( 2009 ), “ global imbalances and global governance ”, paper presented at the ` global economic governance : systemic challenges, institutional responses and the role of the new actors ’, brussels, february. de larosiere report ( 2009 ), “ report of the high - level group on financial supervision in the eu ” ( chairman : jacques de larosiere ), brussels. mohan, rakesh ( 2006a ), “ coping with liquidity management in india : a practitioner's view ”, reserve bank of india bulletin, april. - - - - ( 2006b ), “ evolution of central banking in india ”, reserve bank of india bulletin, june - - - - ( 2007 ), “ india's financial sector reforms : fostering growth while containing risk ”, reserve bank of india bulletin, december. portes, richard ( 2009 ), “ global imbalances ” in mathias dewatripont, xavier freixas and richard portes ( ed. ), “ macroeconomic stability and financial regulation : key issues for the g20 ”, centre for economic policy research, london. obstfeld, maurice ( 2009 ), “ international finance and growth in developing countries : what have we learned? ”, working paper 14691, national bureau of economic research, cambridge, ma. reserve bank of india ( 2009a ), “ india ’ s financial sector : an assessment ” committee on financial sector assessment ( chairman : rakesh mohan )