incidentally, but significantly, was also the case, in the recent global financial crisis, with large global banks. besides, in india, unlike a company, shareholders / members of a ucb, are generally the debtors of the bank. while this would be an appropriate framework for governance for a cooperative society, which accepts deposits only from members / shareholders, it leads to distortion in the business model when applied to a cooperative bank, which solicits deposits from non - members as well. as majority of the share holders are borrowers in ucbs, the elected management would have an incentive to pursue policies which are more borrower oriented that may not always be in the best interests of depositors. also, unlike in the case of companies, the shares of which are listed on a stock exchange and can change hands without affecting the capital base, in the case of ucbs, the shareholders can withdraw their contribution to capital and shrink the capital of the bank and thereby limit its ability to increase risk weighted assets and expand business. response strategy keeping in view the characteristics of the ucb sector, reserve bank initiated a series of measures to resolve the structural problems and strengthen the banks. in what follows, i set out the initiatives of the reserve bank in dealing with the crisis. a. withholding of new bank and branch licenses licensing norms for ucbs were eased in may 1993 and within 8 years i. e. by june 2004, more than 800 banks mushroomed and close to one third of these newly licensed ucbs became financially weak within a short period of 2 - 3 years. there was, thus, a need to moderate the pace of growth of this sector and it was, therefore, decided in june 2004 to stop issue of licenses for new banks and branches until a suitable framework for regulation and supervision was in place for the already large number of ucbs. b. vision document for ucbs recognizing the systemic risk concerns, reserve bank reviewed the entire gamut of legislative, regulatory and supervisory framework for these banks, and in march 2005, brought out a draft “ vision document for ucbs ”. the vision document, discussed the characteristics of the sector, analyzed the problems afflicting the banks and proposed the following regulatory and supervisory strategies for dealing with the problems affecting the sector : a ) nuanced and granular approach to supervision and regulation highlighting the heterogeneity of the sector, the vision document observed that the “ one size fits all ” approach to regulation and supervision of uc

vitas vasiliauskas : should macroprudential policy target real estate prices? welcome remarks by mr vitas vasiliauskas, governor of the bank of lithuania, at the macroprudential policy conference, vilnius, 12 may 2017. * * * good morning, ladies and gentlemen, it ’ s my pleasure to join you on the second day of this conference and thank you all – speakers, panellists and participants – for getting together to discuss this relevant topic. and of course, a special thank you to our keynote speakers – dr stefan ingves, governor of sveriges riksbank, and dr jon danielsson, director of the systemic risk center, who gave a keynote speech yesterday. much to my regret i wasn ’ t able to be part of your previous exchange of views on whether and how macroprudential policy should react to real estate price changes. i know you also discussed the current macropudential measures and their ability to efficiently reduce real estate market imbalances. but still a good bunch of pending questions promises us another intensive day. dear colleagues, today – when we ask ‘ should macroprudential policy target real estate prices? ’, one may answer with a quick ‘ no ’. but this would make us think about the periods, when the real estate boom ended in a bust. you know better than anyone, that people use various indicators to foresee the turning of the business cycle – industrial production, credit and real estate price growth, or even cranes looming over the city. well, this morning while driving through the city i got the impression that they – i mean cranes – do disturb the skyline quite freely and, thus, warn us to watch the market temperature closely. it ’ s broadly acknowledged that huge fluctuations in real estate prices have a chance of leading to financial disasters. history has taught us that crises are typically preceded by lending booms and formation of asset price bubbles. when the bubble deflates, it hurts the financial system and then – the real economy. eventually this costs us far too much. having in mind what we all witnessed in the last decade, i ’ m tempted to answer the previous question with a ‘ yes ’. let ’ s look at what was happening in real estate sectors of the baltic states in the years prior to the financial crisis and the years afterwards. to illustrate : prior to the great turmoil of 2008 lithuania ’ s real estate sector was flooded by credit. the curve of the real estate