has been strongly reinforced and supervisory colleges for large complex financial groups have been established. at eu level, the setting up and functioning of colleges is provided for in the eu regulatory framework and is well advanced. looking ahead, legislative proposals should fully reflect the ongoing work at international and eu level aiming at enhancing the resilience of the financial system and protect consumers and investors against the impact of excessive risk taking and irresponsible market practices. main priorities include : ( 1 ) finalising the reform of the prudential framework ; ( 2 ) addressing the risks posed by systemically important institutions ; and ( 3 ) setting a framework for macro - prudential supervision. • first, the strengthened prudential framework currently being developed needs to be properly and timely finalised. the agreed measures, when implemented, will address many of the shortcoming highlighted by the financial crisis, and will increase the ability of financial institutions to withstand shocks and thus the resilience of the financial system. in this context, let me highlight the importance of a thorough impact assessment, to be carried out in the course of this year, before the final calibration of the framework can be made. the exact timing of implementation has, equally, to be carefully considered, so that the economic and financial recovery will not be endangered. in this context, adequate transition and grandfathering arrangements should be ensured. • second, legislative reform also needs to address the moral hazard stemming from systemically important financial institutions. in a resilient financial system it cannot and should not be taken for granted that authorities will always come to the rescue. the focus of the ongoing work by the fsb in this regard is threefold : • 1. it seeks to ensure that financial institutions, whatever their size and interconnectedness, should not cause undue distress to the functioning of the financial system and to the economy as a whole, if and when mismanagement drive them to bankruptcy. possible tools include introducing capital and liquidity surcharges, or constraining size or the range of activities, to reduce the externalities of systemically important institutions to the society. 2. the core financial infrastructures and markets need to be strengthened, for example via the promotion of central counterparty clearing and revision of supervisory standards on financial market infrastructures. 3. we also need to review resolution regimes and bankruptcy laws to ensure an orderly winding - down of systemic cross - border financial institutions. in this respect, the european commission has already launched a public

, here also, rbi did prescribe them. it started with creation of the crilc database which enabled compilation of information on level of indebtedness of various groups to the financial system. this was followed by issuance of guidelines on “ early recognition of financial distress, prompt steps for resolution and fair recovery for lenders : framework for revitalising distressed assets in the economy by rbi, which were aimed at improving the system ’ s ability to deal with corporate and financial institution distress. detailed guidelines on formation of joint lenders ’ forum ( jlf ), corrective action plan ( cap ), ‘ refinancing of project loans ’, ‘ sale of npas by banks ’ and other regulatory measures were also issued to banks for enabling prompt steps for early identification of problem cases, timely restructuring of accounts considered to be viable and recovery or sale of unviable accounts. the 5 / 25 scheme and the strategic debt restructuring scheme were also introduced with a view to enable reduction in stress levels and early resolution. surgical procedure 9. after the pre - operative procedures, rbi undertook a surgical procedure in the form of asset quality review at banks. the exercise was aimed at tracing the sources of pain and pressure points so that remedial procedure could be administered. goi must be complimented for extending total support by infusing capital / committing to infuse capital in the weaker psbs. 10. whether this surgery is successful? did it have the desired impact? i would think so. in my interaction with various players, i sense it has a very positive impact, even in tier ii and tier iii towns. the promoters have realized that the banks are going to come hard after bis central bankers ’ speeches them if they don ’ t observe credit discipline. of course, there are skeptics who say whether it was the right time to rbi to undertake this initiative especially at a stage when the economy is growing slowly. interestingly, some of these are the very same people who earlier criticized rbi for letting things drift and banks being allowed too much of forbearance. in sum, the larger fallout of the exercise is that there is a “ better credit discipline in the country ”. unsolicited advices 11. you must have experienced how many advices come your way if you suffer from an ailment. every other person has an opinion and a remedy for the same, including weird alternate therapies. situation here is not much different. even as rbi has