the rbi under the banking regulation ( br ) act of 1949. additionally, all public sector banks are regulated by the government of india ( goi ) under the banking companies ( acquisition and transfer of undertakings ) act, 1970 ; the bank nationalisation act, 1980 ; and the state bank of india act, 1955. section 51 of the amended br act explicitly states which portions of the br act apply to the psbs, most common thread across the omissions being complete removal or emaciation of rbi powers on corporate governance at psbs : 1. rbi cannot remove directors and management at psbs as section 36aa ( 1 ) of the br act is not applicable to the psbs. 2. section 36aca ( 1 ) of the br act that provides for supersession of a bank board is also not applicable in the case of psbs ( and regional rural banks or rrbs ) as they are not banking companies registered under the companies act. 3. section 10b ( 6 ) of the br act that provides for removal of the chairman and managing director ( md ) of a banking company is also not applicable in the case of psbs. 2 4. rbi cannot force a merger in the case of psbs as per section 45 of the br act. 5. psb ’ s banking activity does not require license from rbi under section 21 of the br act ; hence, rbi cannot revoke a license under section 22 ( 4 ) of the br act as it can in the case of private sector banks. 6. rbi cannot trigger liquidation of psbs as per section 39 of the br act. 7. furthermore, in a remarkable exception of sorts, in some cases there is duality of managing director and the chairman – they are the same – implying the md is primarily answerable only to himself or herself. this legislative reality has in effect led to a deep fissure in the landscape of banking regulatory 2 / 8 bis central bankers'speeches terrain : a system of dual regulation, by the finance ministry in addition to rbi. 3 i will now take a few minutes to explain why this fissure or the fault line is bound to lead to tremors such as the most recent fraud. temptation to engage in fraud at the level of employee or employees is always present, in banks ( or in corporations ), be it in public sector or private sector. the question then is whether there is adequate deterrence faced by employees from undertaking frauds and enough incentives for management to put

central bank ( ecb ), the recent comprehensive assessment is an important step toward building confidence in euro - area banks. i wish the ecb great success as it takes on its new responsibilities at the center of the single supervisory mechanism. at the federal reserve, we have devoted substantially increased resources to monitoring financial stability and have refocused our regulatory and supervisory efforts to limit the buildup of systemic risk. this macroprudential approach to promoting financial stability will be an important complement to our other tools for promoting a healthy economy. looking ahead in advanced economies, the current macroeconomic policy mix generally remains one of extraordinary monetary policy stimulus and somewhat contractionary fiscal policy. considering the headwinds that continue to weigh on growth, employment, and prices, this situation is hardly ideal. policymakers face difficult choices as they seek to balance the need for long - term fiscal sustainability with the need to support their economies in the near term. even so, i continue to anticipate that the headwinds associated with the financial crisis will wane. as employment, economic activity, and inflation rates return to normal, monetary policy will eventually need to normalize too, although the speed and timing of this normalization will likely differ across countries based on differences in the pace of recovery in domestic conditions. this normalization could lead to some heightened financial volatility. but as i have noted on other occasions, for our part, the federal reserve will strive to clearly and transparently communicate its monetary policy strategy in order to minimize the likelihood of surprises that could disrupt financial markets, both at home and around the world. more importantly, the normalization of monetary policy will be an important sign that economic conditions more generally are finally emerging from the shadow of the great recession. bis central bankers ’ speeches