face of such adverse shocks, ccps must meet the highest standards of financial and operational risk management. and an enhanced dialogue is necessary between ccps, clearing banks and clients to ensure that, while managing their risks prudently, they each consider the impact that their actions may have on others and on the entire financial system. central clearing is critical for sharing and managing risks effectively, and thus for supporting economic growth. euro - denominated central clearing must not be a source of instability in the euro area or hamper the transmission of monetary policy. if disruptions in systemically important clearing services are not managed appropriately, they could be channelled through the large payment flows between ccps and their participants, with knock - on effects on the smooth functioning of our payment and banking systems. the reverberations could reach financial markets and the instruments we rely on to perform central banking activities. 1 / 4 bis central bankers'speeches the post - brexit clearing landscape we need to consider carefully the implications of the united kingdom ’ s departure from the eu, in particular in relation to the derivatives transactions of eu entities. the city of london has long been a leading central clearing hub for eu banks and their clients, who have relied on uk ccps for the clearing of otc derivatives of all asset classes and in all currencies. uk ccps hold a dominant position for the clearing of euro - denominated interest rate derivatives and credit default swaps, with a market share of about 80 % and 40 % respectively. brexit has made it urgent to consider the extent to which the eu should depend on non - eu countries for critical market infrastructure. with respect to derivatives clearing, since 1 january 2021 uk ccps have been temporarily considered equivalent to eu ccps from an oversight and regulatory perspective, so as to avoid potential cliff - edge financial stability risks. this equivalence decision by the european commission is valid for 18 months, until 30 june 2022. 2 meanwhile, industry stakeholders are encouraged to reduce their eu exposures to uk ccps. the commission has set up a working group with eu authorities and industry to address the issues involved and to facilitate the transfer of derivatives contracts denominated in euro or other eu currencies to eu ccps. from a supervisory perspective, uk ccps have been recognised as third - country ccps by the european securities and markets authority ( esma ). 3 and two uk ccps have been recognised as being systemically important for the eu (

summit & awards 2025 on january 17, 2025 at mumbai. inputs provided by akhilesh gokhale, tony mammen and shashank srivastava are gratefully acknowledged. page 2 of 9 4. it is now well understood that liability management is crucial not only for the stability and solvency of a regulated entity ( re ) but is also as a key factor influencing its return on capital and growth trajectory. from the earnings perspective, the spread on interest earned on loans and the cost of funds determines the bank ’ s net income and profitability 2. the cost of liabilities thus has a direct impact on net interest margins ( nims ) and earnings ratios. for instance, the share of current and savings account ( casa ) deposits in total deposits, the mix of retail versus wholesale funding and the duration of liabilities play a key role in determining the funding cost and, therefore, profitability of banks. further, the stability of funding is the key to resilience during any crisis. in this context, let me dwell briefly on the evolution of liability management in india, changing trends in liability structure, entity - specific challenges, and regulatory expectations. evolution of alm in india 5. as you all are aware, indian banking underwent a strategic transformation with the broader economic reforms of the 1990s. the deregulation of interest rates and greater global integration made the risks encountered by financial institutions more complex and significant, requiring strategic management. accordingly, the guidelines on assetliability management ( alm ) for financial institutions were first issued in february 1999 with further additions in late 2000s, covering the interest rate and liquidity risks along with prudential limits and disclosure framework. 6. the indian prudential framework incorporated the basel committee on banking supervision ( bcbs ) principles for sound liquidity risk management in 2012, followed by the adoption of two minimum standards for funding liquidity viz. lcr and nsfr. recognizing that the lcr calibrations overlooked intraday liquidity and the increasing interdependencies within the financial system could lead to liquidity disruptions affecting payment and settlement processes, guidelines for monitoring intraday liquidity were introduced. to mitigate the concentration risk and to curtail systemic implications of uncontrolled liability of larger banks, the reserve bank had very early on put in place limits on inter - bank liabilities ( ibl ) for commercial banks ( 2007 ) and interbank deposit limits for urban cooperative banks ( ucbs ) (