in the system. it may get further help from easing commodity prices and growth returning in some parts of the globe. our concern on restructuring is more around the fairness of the process. it should address the problem, not merely postpone it. hence, rbi has set out clear guidelines that a second round of restructuring would lead to automatic classification of the asset as non - performing and call for a higher provisioning requirement. ii ) capital adequacy of banks 15. there have been numerous discussions on the need and ability of the indian banks to raise additional capital to support their business, going forward. i would not say that the concerns raised in this regard are entirely misplaced, especially for the public sector banks. the need to shore up capital adequacy would arise on account of pulls from several directions. these include need for higher provisioning requirements due to deterioration in asset quality, phased implementation of basel iii capital norms, capital required to cover additional risk areas under the risk based supervision framework as also the need to expand the business and meet the likelihood of higher credit demand going forward. let me tell you that at present, the capital position of indian banks is comfortable with all of them meeting the extant regulatory requirement comfortably. the capital to risk weighted assets ratio ( crar ) for indian banks under basel iii as at end march 2014 stood at a comfortable level of bis central bankers ’ speeches 12. 9 per cent. while the ratio for the psbs was lower at around 11. 38 per cent, the ratio in case of private sector and the foreign banks was in excess of 16 per cent. going ahead, the capital position of the banks, especially the psbs, is likely to come under some strain, both in terms of quantity and quality. to meet minimum capital requirements, capital buffers, domestically systemically important banks ( dsibs ) surcharge and impact of increased stressed assets, the government ’ s contribution to the equity up to march 31, 2019, would have to be to the tune of two lakh forty thousand crore rupees at the existing level of its shareholding in respective public sector banks. this requirement is independent of the risk based capital requirements which the banks might need under the rbs process. it is, however, important to note that this requirement may come down if, going forward, the asset quality improves on account of higher growth and consequently, higher internal retention. notwithstanding the room available to the banks to meet the basel iii timeline, the banks have

jose de gregorio : lessons and challenges on financial regulation introductory remarks by mr jose de gregorio, governor of the central bank of chile, at the conference “ financial regulation : lessons from the recent global crisis ”, santiago, 17 august 2009. i am very grateful to luis opazo for his contribution to this presentation. * * * what went wrong? this question has been at the center of recent discussions in academic, practitioner and political circles, and will probably stay with us for several years. this conference is a step forward towards finding answers to this question. specifically, the main purpose of the conference is to discuss those aspects of regulation that may have triggered or amplified the current crisis, and those aspects of regulation that in some countries have contributed to financial resilience. the chilean financial system, as well as those of many other developing countries, has shown to be very resilient. nevertheless, we also need to be involved in the discussions on building a safer financial system. our countries have a lot to say on balancing financial innovation and financial soundness. the global economy shows some signs of recovery, but it is not evident that the crisis and its effects have fully unfolded. more likely, they will continue to evolve for some time. however, it is not too early to discuss these topics. hence, we hope that the presentations and discussions of this morning will shed light on the directions for regulatory change in the upcoming years. causes of the financial turbulences and their implications on financial regulation the subprime crisis is the result of the convergence of several elements at the same time – what some observers have called a “ perfect storm. ” trying to keep things simple, the element that triggered this crisis lies in the u. s. mortgage sector and a process of rapid financial innovation. in this regard, the banking industry contributed to the lending and housing boom as follows. first, the traditional banking model – hold loans until they are repaid – was replaced by a distribution model, where loans are pooled, tranched, and finally sold via securitization to other financial investors, thus this process led to banks ’ off - loading risk. second, the funding of highly leveraged financial intermediaries with short term liabilities increased throughout this period, which exposed those intermediaries to potential stress derived from changes in market liquidity conditions. as we all know, the originate and distribute model led to the fast development of securitization markets characterized by an ever - increasing supply of