A meeting attended by the financial sector regulators last Sunday decided to form a non-statutory platform called the Financial Stability Group (FSG) to ensure better coordination among all the regulators operating in the sector. The decision is a welcome one since lack of coordination or poor coordination among the key players in all the sectors, economic or otherwise, remains a major problem in this country. Every public sector agency takes decision and implements the same in its own way and does not bother to consult others. In the process, it creates a host of problems for itself and also for others.
The lack of interest among various government as well as statutory regulatory agencies to have better coordination in areas of governance, project implementation and regulatory work does often give rise to problems of serious nature. Citizens are forced to suffer, both physically and financially, because of lack of coordination. There are instances galore how residents suffer physically and the state, economically, day after day in the absence of coordination among various utility service-providers in towns and cities. In the financial sector, problems do often emerge due to unwillingness of the regulatory agencies to share information, discuss regulatory issues and coordinate responses to potential threats to financial stability.
There is no denying that regulatory failures were largely responsible for the collapse of the stock market in 1996 and 2010 and the lack of coordination between, at least, two key players, the Bangladesh Bank and the Bangladesh Securities and Exchange Commission (BSEC), had played a part in it. Even after the collapse of the market in 1996, the relevant agencies had not been alert enough about the need for coordination and information sharing. So, the move, though a belated one, to form a FSG would be commended by all concerned.
However, if the objective behind the formation of the FSG remains confined to serving only the purposes of the capital market, the focus of the platform might prove to be narrow. It would then hardly make any meaningful contribution to the efficiency and effectiveness of financial regulation and financial stability of the country. A good number of countries have similar platforms but they meet regularly and advise their respective governments on financial matters and regulatory arrangements. Neighbouring India has quite a powerful body named the Financial Stability and Development Council (FSDC). Headed by the Indian finance minister, the FSDC is mandated to make efforts for strengthening the financial stability and inter-regulatory coordination.
The decision to form the FSG, as it appears to be the case, has not been taken in response to any directive from the government policy-makers. It has rather come, following discussions among various regulatory bodies present at the last Sunday's meeting. The issue of financial stability, being a wider and important one, deserves far greater attention at the level of the country's policy-makers. When it comes to the financial sector stability, factors, both domestic and external, would obviously come into play. So, it would be prudent to attach more importance to the FSG that would deal with all the relevant factors on a regular basis, while keeping its eye on the issue of coordination among various regulators in the financial sector.
