need to take part in this debate, while taking action will obviously be a decision for political leaders. this is also why our focus should be on the eurozone economic governance. we should not fear different speeds in europe. i am strongly in favor of the uk remaining within the eu ; yet, irrespective of the outcome of the british referendum, the eurozone can and should pursue further integration. the euro crisis has revealed how unprepared we were. the expected dynamics between peer pressure and market discipline did not work, as markets did not believe in the no - bailout principle, and as national authorities did not really accept peer pressure, nor the implementation of the rules. bis central bankers ’ speeches the absence of coordination has a genuine economic cost. it includes the cost of crises and assistance programmes, as well as the impact on growth due to uneven compliance with budgetary rules before the crisis and rigidity of the rules during the crisis. several studies point to a significant cost of non - coordination, in the order of 2 to 5 % of gdp since the crisis. to take the debate forward, three principled choices have to be made : first : making parallel progress on both domestic reforms and european coordination. this is the cornerstone of any french - german agreement : to be fair, the french call for germany to support coordination, and the german doubt about french reforms, have been and are still well - founded. this requires overcoming distrust between countries and putting both aspects under the same umbrella, namely a common institution. second, we must recognize that institutions with a mandate are superior to rules without institutions. to bolster policy consistency and coordination, we admittedly need simpler rules. but they should be supported by strong institutions with discretionary powers. mario draghi pointed out 1 the fundamental difference between a monetary policy institution and fiscal rules, which are exemplified by the track records of the ecb and sgp respectively. third, there is room for an intermediate level of integration, as shown in a simple but illustrative matrix. i would call it “ full coordination of national policies ”, a presently missing link between integration, as we have for monetary policy decision - making, and rule - based surveillance, such as is currently the case for national fiscal policies in europe and which is clearly lacking teeth. speech by mario draghi, president of the ecb, at sz finance day 2015, frankfurt am main, 16 march 2015. bis central bankers ’ speeches to be sure, the highest

what distinguishes them is the less or more prescriptive regulations. governance is based on the basic tenets of transparency and accountability. transparency in decision - making provides comfort to all stake holders and accountability which follows from transparency fixes responsibilities for actions taken or not taken. together they safeguard the interests of the stakeholders in the organisation. there were serious deficiencies observed in the governance framework of some of the mfis. the corporate governance issues in the mfi sector were exacerbated by some of the “ for profit ” mfis, dominated and controlled by promoter shareholders which led to inadequate internal checks and balances over executive decision making and conflict of interests at various levels. other undesirable practices such as connected lending, excessively generous compensation practices for senior management, founders / directors and failure of internal controls leading to frauds precipitated the crisis. some of the mfis chased high growth trajectory at the expense of corporate best practices. the listing and trading of the shares of the “ for profit ” mfis generated a set of incentives which attracted capital looking for high returns whereas the capital suited for catering to the needs of the poor has to be patient capital. this disconnect led to further worsening of the situation. what is more disturbing is that there were enough warning signals of trouble in making over an extended period of time but the mfis, at least some of them, carried away by their immediate success, failed to pay heed. these events have been narrated by dr. y v reddy, former governor, reserve bank of india in an article titled “ microfinance industry in india : some thoughts ” in economic and political weekly ( epw ) ( october 8, 2011 ). relating the events in andhra pradesh, he has stated that government of andhra pradesh always had discomfort with the nbfc - mfis and every effort was made by the reserve bank of india to introduce a voluntary code of conduct. resolution in this regard was thought to have been achieved in 2007. in retrospect, dr. reddy says that perhaps the trust that reserve bank placed in the commitment of mfis was misplaced and, given the track record, the reserve bank should have insisted on enforceable regulation and not been content with an advisory role. dr. reddy ’ s observations lead to another very important tenet of corporate governance i. e. the need to pay attention to the feedback loops, particularly the negative feedback loops and to take mid -