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Re: [FunCompForum] WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS?

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  • rajeev.c@nic.in
    I have been following this debate with interest, especially the views of Dr Reddy and Rakesh Mohan. Here are my views 1. The RBI has the obvious roles of being
    Message 1 of 52 , May 15, 2012
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      I have been following this debate with interest, especially the views of Dr Reddy and Rakesh Mohan.

      Here are my views

      1. The RBI has the obvious roles of being central banker and also the banking regulator. Currently it also has a not-so-clear role vis a vis banking consumers.

      2. Its central bank role is obvious. Its performance in that role is mostly in public domain.

      3. Its performance as banking regulator is not as well scrutinized or understood - and it has had failures on its watch - GTB etc

      4. On the critical issue of creating competition, choice and protecting borrowers rights - Ii believe (and this is purely my personal opinion) RBI has failed to demonstrate that these are indeed high on its priority of mandates. It is obvious today to a borrower that the banking sector is far from being open. Arguably banks are operating as cartels in fixing rates etc

      5. And given that RBI has all these complex objectives, it would not be a bad idea for the specific issue of competition to continue to be championed by the competition regulator - as an institution that must successfully evolve into a consumer choice champion.

      6. This turf overlap between sectoral regulators and competition regulator is to be expected and some amount of tension is not a bad idea as long as there is an escalation and resolution definition. These are early days in the development of regulators in these areas.

      7. In summary, I am not in favour of giving an unquestioned carte blanche to the central bank unless they can demonstrate their capacity to address the issue of choice and competition.

      Regards

      Rajeev Chandrasekhar
      Member of Parliament

      Sent from BlackBerry® on Airtel


      From: Amitabh Kumar <amitabh.kumar@...>
      Sender: FunCompForum@yahoogroups.com
      Date: Mon, 14 May 2012 12:51:54 +0000
      To: FunComp Forum<funcompforum@yahoogroups.com>
      Subject: RE: [FunCompForum] WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS?

      The issue is getting a little confused in this lively debate. It is nobody’s case that subjecting any sector to the scrutiny of CCI is a verdict on the sectoral regulator. The sectoral regulator may have impeccable credentials and unenviable history but may suffer from the mandate to ensure competition. How does the mandate of enforcing prudential norm result in to a competitive situation? Isn’t the RBI expected to enforce prudential norms? Axiomatically, the focus on competition will be absent. It must be kept in mind that RBI controls one essential element of a free market, namely, entry through the power to issue licence. CCI cannot be asked to question why a licence was granted or denied. The only aspect that both CCI and RBI will have to look simultaneously is a merger. That will look at a merger through separate lenses goes without saying. It can be said with certainty that the two lenses will not be so different to cancel each other’s findings.

      The two authorities may, hopefully, decide to work together and make reference to each other (possibility exists in the law), which will be an ideal situation. A 2008 like scenario of Lloyds acquisition of HBOS is a different ball game, one where political-economy takes over. If a situation like this comes, the sectoral regulator as well as the competition authority may have similar views. In any case, why fret too much about such rare events? Let us think of sectoral regulators and the competition authority work in harmony to uplift a faltering economy rather than take nuanced stands to drive a wedge in the regulatory space.

      Warm regards,

      Amitabh Kumar
      Partner 
         
      J. Sagar Associates I advocates & solicitors

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      From: FunCompForum@yahoogroups.com [mailto:FunCompForum@yahoogroups.com] On Behalf Of sjalan
      Sent: Saturday, May 12, 2012 8:44 PM
      To: FunComp Forum
      Subject: Re: [FunCompForum] WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS?

      My views are very similar to Dr Reddy’s and Tarun’s.

      Banking has to be severely differentiated from other industries. Finance is a Life giver and sine qua non for all industries and trade. If we over regulate or control it (RBI does its job admirably), we may choke the entire oxygen system, leading to total collapse.

      I am sorry if my views are too forceful for comfort of a few.

      Regards,

      Sudhir Jalan

      From: Tarun Das
      Sent: Friday, May 11, 2012 9:29 PM
      To: FunComp Forum
      Subject: RE: [FunCompForum] WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS?

      I agree with views of Dr. Y V Reddy. We cannot bring every sector, particularly finance and banking, under the Competition Commission.

      In general, the sectors which have well established regulators under the Act of Parliament should be excluded from the Competition Act. Besides, theoretically perfect competition is a utopia, and the real world is neither perfect nor competitive. So we have to accept certain degree of imperfections in the sectors like finance or banking which can be judged only by the Reserve Bank of India which has established prudential norms, regulations and expertise over the years.

      Tarun Das Ph.D.
      World Bank Technical Expert (Linking Planning with Budgeting and MTBF)
      Multidonor Funded Project on DMTBF and Strengthening Financial Accountability
      Ministry of Finance, Government of Bangladesh, Dhaka.


      To: FunCompForum@yahoogroups.com
      From: yvenureddy@...
      Date: Fri, 11 May 2012 13:06:02 +0530
      Subject: Re: [FunCompForum] WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS?

      I think in UK banking was brought under Competition Act which created problems and there were efforts to reverse it.

      In Germany also they had problems with the competition authority's jurisdiction, in resolving the problem of a small bank but performing critical functions in a specialized segment of finance.

      The lessons from crisis include three relevant ones: Finance is different; banking is special; and unlevel playing field may be prescribed for those considered too big to fail or too critical for system.

      Banking regulation and central bank as well as monetary authority may ideally not be treated as a sectoral regulator but as something more than that.

      All the best.

      Y. V. Reddy

      Sent from my iPad


      On May 11, 2012, at 8:59 AM, SL Rao <surendral.rao@...> wrote:

      Very well said and this is what I had concluded some years ago on CCI and sector regulators. Banking is separate from everything else. As we saw in the USA, billions were spent to avoid economic collapse when banks were overstretched "too big to fail" was a result of mergers without reference to how the Federal Reserve could regulate these new entities an how the could be managed prudently.
      This is even more true in India where banking and it's regulation are still developing.
      It is specious to compare banking with other sectors. None is so much part of government policy.
      Regards, SLRao
      S L Rao, 918022275132; 9343198450. Sent from my I pad


      On May 10, 2012, at 15:27, "Udai Singh Mehta" <usm@...> wrote:

      On the one hand, bank regulators possess important sector information of relevance to merger decisions, and are also in a better position to monitor behavioural remedies for mergers. On the other hand, competition agencies enjoy the advantage of possessing analytical skills and judgment honed in reviewing many more mergers than bank regulators are likely to encounter. It is interesting to note that although the United Kingdom has given concurrent powers to several sector regulators to enforce competition laws regarding anti-competitive agreements and abuse of dominance; it has not done so as regards merger review.

      The interface between the Competition Commission vis-�-vis sectoral regulators is critical. The basic premise to be recognised is that sectoral regulators have domain expertise in their relevant sectors. The Competition Commission, established under the Competition Act, 2002 on the other hand, has been constituted with a broad mandate to deal with competition for which certain very specific parameters are laid down under the Act. The starting point, however, is for both to try and appreciate the difference between technical and competition issues. The sector regulators should have the leading role in regulating technical issues. Thus, for structural issues, which in most cases are ex ante, sector regulators should take a leading role. But, for competition issues which are largely behavioural and ex post, competition authorities should take a leading role. Let us not forget, the role of competition authority is to ‘Protect’ competition and the role of sector regulators is to ‘Promote’ competition, thus it is important to ensure synergies between sector regulators and the competition commission.  Above all, nowhere in the world, banking is exempted from the purview of the competition authority except in one or two countries, and they are not irrational in taking such a step.

      Thus, a formal mechanism for coordination between the competition commission and the sectoral regulators is, therefore, of key importance. Coordination between sectoral regulators and competition commission should be made mandatory through suitable provisions in the Competition Act, 2002 and sectoral laws.

      Regards,

      Udai

      ----------------------
      Udai S Mehta
      Associate Director, CUTS International &

      Centre Coordinator,

      CUTS Centre for Competition, Investment &
      Economic Regulation (CUTS CCIER)
      D-217, Bhaskar Marg, Bani Park, Jaipur-302016, India
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      From: FunCompForum@yahoogroups.com [mailto:FunCompForum@yahoogroups.com] On Behalf Of Somasekhar Sundaresan
      Sent: 09 May 2012 19:58
      To: FunComp Forum
      Subject: RE: [FunCompForum] WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS?

      With all respect, I humbly beg to differ. When we have a regulator for a sector, the regulator should concern itself with its sectoral mandate. The mandate of the Competition Commission as a regulator is not the same as the mandate of the sectoral regulator.

      By this token, merger of securities market intermediaries (merchant bankers, mutual funds, stock brokers etc.) should be with SEBI, mergers of insurance companies should be with the IRDA, airline company mergers should be with the DGCA, mergers of pension funds should be with the PFRDA, mergers of telecom companies should be with TRAI, merger of broadcasting companies should be the MIB, and in short, merger of any regulated entity should be governed by its sectoral regulator.

      The Competition Commission may be left with little work to do, with oversight over just those who are unfortunate enough not to have a sectoral regulator (say information technology companies, BPO companies etc). The mandate by Parliament in the law is not envisaged to be structured thus.

      Just as government policy covers entry of foreign banks and their expansion, the entry of foreign players in many sectors is subject matter of regulatory, and by the same token, the CCI should have no role. For example, the MIB has a policy on ownership of DTH companies and therefore the CCI should be kept out because policy is involved. Which would leave next to nothing for CCI to do – contrary to the mandate in the statute.

      Regards,

      Somasekhar

      Somasekhar Sundaresan
      Partner

      <image002.jpg>  

      J. Sagar Associates I advocates & solicitors
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      From: FunCompForum@yahoogroups.com [mailto:FunCompForum@yahoogroups.com] On Behalf Of Surendra L. Rao
      Sent: Wednesday, May 09, 2012 3:16 PM
      To: FunComp Forum
      Subject: Re: [FunCompForum] WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS?

       

      Banks have been regulated entirely by the RBI. There is a huge concentration of ownership with government. The stability and economic security of the banking system are vital to the health of the economy.

      At the level of price competition, the RBI has tended to follow the directives of government. Most recently when RBI reduced repo rates by 0.5% and banks did not immediately reduce rates, banks were compelled to reduce lending and deposit rates. This should have been a purely commercial decision but RBI intervened presumably because government was anxious to respond to the pleas of industry that lower rates would stimulate growth. CCI did not charge RBI with anti-competitive practice.

      As far as M & A's are concerned we must distinguish between foreign banks, private and the nationalised banks. The latter are the largest in number and financial strength. Foreign banks and their expansion are part of government policy. CCI cannot have a role in this.

      Similarly private domestic ownership is watched closely to prevent industrialists from getting control over banks. There is a lot of lobbying by many to do so. CCI does not have a role because policy is involved.

      That leaves government banks. Will CCI intervene if and when SBI amalgamates SBM, SBH, and other associate banks with it or will it leave this alone?

      I do not think that CCI should enter the bank space. We cannot have two regulators for one sector. It causes confusion and sends wrong signals.

      S. L. RAO
      D1 Chartered Cottage, 8 Langford Road, Bangalore 560025 India; (91 80) 22275132; Mobile 93431 98450
      Fax:(91 80) 22122380
      http://www.slrao.com/

      On Wed, May 9, 2012 at 2:33 PM, CUTS CCIER <c-cier@...> wrote:

      COMMENTS INVITED

      WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS?
      Business Standard, May 09, 2012

      Pradeep S Mehta

      As a prudential regulator, the central bank cannot step into the shoes of the Competition Commission of India. What is needed is more cooperation between the two authorities

      Ever since the Competition Commission of India (CCI) started taking baby steps to regulate the jungle of competition abuses in the country, and some very successful cases, many started howling for an exemption from its bite. The latest one is from banking circles asking for an exemption from CCI’s remit to review mergers under the Competition Act, 2002, in that sector. Other strong contenders include the Department of Telecommunications seeking an exemption for the telecom sector. These moves are tragic and will affect the integrity of our economic governance system, and should be discouraged as strongly as the demand being made for exemptions.

      In the case of giving the Reserve Bank of India (RBI) power to review mergers in the banking sector, let me argue thus. The banking sector’s stability is critical for the whole economy and we have learnt bitter lessons from the regulatory failures in the mecca of capitalism: the US. Second, there are too many banks in the public sector in India that need to be consolidated. However, these are two different issues and should not be confused. In Brazil, the central bank reviews all banking mergers from the angle of financial stability, but only when the competition authority refers the matter to the bank after it carries out its own due diligence.

      To read more, please follow the link:
      http://business-standard.com/india/news/bpradeep-s-mehtab-will-rbi-bebetter-judge-for-banking-mergers/473754/

    • CUTS CCIER
      GOVT WORKING TO EXEMPT FAILING BANK M&AS FROM CCI PURVIEW Financial Express, December 07, 2012 The Ministry of Corporate Affairs is working to exempt merger
      Message 52 of 52 , Dec 13, 2012
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        GOVT WORKING TO EXEMPT FAILING BANK M&AS FROM CCI PURVIEW
        Financial Express, December 07, 2012

        The Ministry of Corporate Affairs is working to exempt merger and acquisition of failing banks from the purview of the Competition Commission of India (CCI). Under section 54 of the Competition Act, the Centre can exempt any sector from the ambit of the CCI till the time it so desires.

        …Earlier, the Reserve Bank of India had made a case for exempting banking sector mergers from the CCI purview arguing that the CCI may not be well equipped to handle bank M&As. However, a Group of Ministers chaired by finance minister P Chidambaram, ruled out blanket exemptions to any sector. The GoM decided that any sector wanting an exemption should make a case to the CCI under Section 54.

        The competition watchdog was of the view that in cases where viability of a bank is in danger, “such cases of failing banks will be handled on top priority to prevent any run down ripple effect on economy”, but now it has agreed to keep loss-making banks out of its’ scope given the fact that it may cause stress on depositors and it would be best to seek approval of only one regulator in such cases.

        To read more please visit the following link:
        http://www.financialexpress.com/news/govt-working-to-exempt-failing-bank-m-amp-as-from-cci-purview/1041513/0

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        From: FunCompForum@yahoogroups.com [mailto:FunCompForum@yahoogroups.com] On Behalf Of CUTS CCIER
        Sent: 20 November 2012 16:39
        To: FunComp Forum
        Subject: RE:[FunCompForum] WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS?

        BOTH CCI AND RBI TO VET M&AS IN BANKING
        Business Standard, November 18, 2012

        While CCI will see competition part of such deals, the RBI will see prudential aspects

        Unlike other sectors, mergers and acquisitions (M&As) in the banking space may have to seek clearance from both fair market watchdog — the Competition Commission of India (CCI) and sectoral regulator--the Reserve Bank of India. The earlier impression was that only involuntary mergers and acquisitions, the ones which are directed by the RBI, will come to the central bank along with CCI.

        However, all mergers and acquisitions may now come under both the watchdogs. While CCI will see competition part of such deals, the RBI will see prudential aspects.

        "For M&A activities, they (banks) will have to seek Reserve Bank approval from prudential point of view. RBI is the sectoral regulator so the health of banks is the concern of the RBI, health of banks is not CCI’s concern, CCI’s concern is their behavior in the market and the consumer in the market," a key CCI official told Business Standard.

        So the concerned banks have to go to the RBI for mergers as they go for branches and other activities and it will look at technical issues related to the sector, he said.

        However, as per the proposed provision in the amendment to the Competition Act they will also have to seek approval from the CCI for M&A activities.

        To read more, please visit the following link:
        http://www.business-standard.com/india/news/both-ccirbi-to-vet-mas-in-banking/196234/on

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        From: FunCompForum@yahoogroups.com [mailto:FunCompForum@yahoogroups.com] On Behalf Of CUTS CCIER
        Sent: 20 November 2012 12:40
        To: 'FunComp Forum'
        Subject: RE: [FunCompForum] WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS?

        CCI TO VET BROWNFIELD PHARMA M&A DEALS
        Financial Express, November 16, 2012

        The Competition Commission of India (CCI) will finally be at the helm of the special dispensation for regulating brownfield M&A deals in the pharma sector. This means that even for the deals that don’t meet the thresholds prescribed in the Competition Act, prior approval of the CCI would be required for investments by foreign firms in Indian pharma companies. The approval would be subject to compliance with a series of public health riders.

        So, a multinational company with an intent to acquire a domestic drug firm would take a commitment at the outset that it would not cut production of essential drugs and R&D spend in the target company in years following the acquisition. The Competition Act will be amended for this purpose.

        This follows a legal opinion obtained by the Prime Minister’s Office (PMO) to validate the point that CCI’s mandate can be extended to deal with ‘public interest issues’.

        Currently, the CCI mandate on M&A deals is in recognition of the appreciable adverse impact they can have on the relevant market. Asset/turnover thresholds are prescribed in the Act for this purpose.

        To read more, please visit the following link:
        http://www.financialexpress.com/news/cci-to-vet-brownfield-pharma-m-amp-a-deals/1031666/0

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        From: FunCompForum@yahoogroups.com [mailto:FunCompForum@yahoogroups.com] On Behalf Of CUTS CCIER
        Sent: 10 October 2012 17:18
        To: FunComp Forum
        Subject: RE: [FunCompForum] WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS?

        SHOULD BANKING M&AS COME UNDER THE CCI?
        Business Standard, October 10, 2012

        It is the only body skilled enough to check anticompetitive practices but it has no role in facilitating the banking consolidation process

        image001.jpg@01CDA708Pradeep S Mehta
        Secretary General, CUTS International

        "In order to address the overlap and conflict issues among our regulators and competition agency, the amendment Bill makes it mandatory for mutual consultation on all such issues"

         

         

        image002.jpg@01CDA708Ashvin Parekh
        Partner | National Leader - Global Financial Services, Ernst & Young

        "Risk management practices and financial strength are more crucial to the sustainability of the sector. So, the commission should perhaps rely on RBI 's approval framework "


        One must compliment Palaniappan Chidambaram to be able to rise above narrow considerations and support the jurisdiction of the Competition Commission of India (CCI) as the sole body to review mergers in not only banking, but all sectors. Thus, he has promoted the integrity of the economic governance system, which is imperative for the success of economic reforms.

        All countries empower the competition regulator to oversee competition issues in all regulated sectors, including banks, purely because of their skills. The only exception vis-à-vis banking mergers is Turkey, but there, too, the central bank has to use the competition law to review mergers. A variation of this exists in the US, where the Federal Reserve and a few big state banking regulators oversee banking mergers, but the Antitrust Division of the Department of Justice can also intervene to check the competition angle.

         

         


        In a free or competitive market economy, the prices of goods and services should be determined by demand and supply. The Competition Commission of India (CCI) was established to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect consumers ' interests and to ensure freedom of trade carried on by other participants in markets. Any monopolistic or restrictive trade practice aimed at controlling supply or prices would be detrimental to the overall economy by reducing the economic efficiency leading to externalities and costs. Given the current regulatory framework and powers of the Reserve Bank of India (RBI), is there a role for CCI in the banking consolidation process?


        To read more, please visit the following link:
        http://www.business-standard.com/india/news/should-banking-mas-come-undercci/489040/

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        From: FunCompForum@yahoogroups.com [mailto:FunCompForum@yahoogroups.com] On Behalf Of CUTS CCIER
        Sent: 05 October 2012 13:30
        To: FunComp Forum
        Subject: RE: [FunCompForum] WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS?

        CABINET NOD FOR CHANGES IN COMPETITION ACT
        PTI, October 04, 2012

        The government expanded the ambit of Competition Commission of India (CCI), with an amendment to the Competition Act, following which all sectors would fall under the purview of the fair trade regulator.

        Approving a proposal by the Ministry of Corporate Affairs in this regard, the Union Cabinet this evening decided to amend the Competition Act, 2002 with a view to fine tune the regulations to bring it at par with the prevailing scenario and in light of the experiences gained over the past years.

        Under the proposed amendments, no sector would be exempted from the purview of the CCI, Finance Minister P Chidambaram told after the Cabinet meeting.

        Earlier, there have been requests for exempting merger and acquisition deals in sectors like banking and insurance from seeking approval from CCI.

        To read more, please visit the following link:
        http://www.business-standard.com/india/news/cabinet-nod-for-changes-in-competition-act/189769/on

        Below are few news items among others:

        CCI TO GET MORE TEETH IN THE NEW COMPETITION ACT
        Business Standard, October 05, 2012
        However, the Competition Commission of India (CCI) will retain its powers to regulate competition-related issues across various sectors including banking, insurance, telecom and power, which have their own regulators.
        http://business-standard.com/india/news/cci-to-get-more-teeth-innew-competition-act/488627/

        CABINET CLEARS CHANGES TO COMPANIES, COMPETITION LAWS
        Livemint, October 04, 2012
        The cabinet cleared amendments to the Competition Act 2007, that ensure no sector is exempt from the purview of the Competition Commission of India (CCI).
        http://www.livemint.com/Politics/DMUTHU2AlVO18Thfe6P1tI/Cabinet-clears-changes-to-companies-competition-laws.html

        CCI SET TO GET SEARCH AND SEIZURE POWERS
        TNN, October 04, 2012
        The government is set to give search and seizure powers to the Competition Commission of India (CCI) to help it investigate companies indulging in unfair trade practices.
        http://timesofindia.indiatimes.com/business/india-business/CCI-set-to-get-search-and-seizure-powers/articleshow/16663755.cms

        MORE TEETH FOR COMPETITION WATCHDOG
        Hindustan Times, October 04, 2012
        http://www.hindustantimes.com/business-news/CorporateNews/More-teeth-for-competition-watchdog/Article1-939929.aspx
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        From: FunCompForum@yahoogroups.com [mailto:FunCompForum@yahoogroups.com] On Behalf Of CUTS CCIER
        Sent: 24 August 2012 21:13
        To:
        funcompforum@yahoogroups.com
        Subject: Re: [FunCompForum] WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS?

        GOM PROPOSALS ON MERGER REVIEW UNDERCOMPETITION ACT WELCOME: `CUTS'
        New Delhi, August 24, 2012

        CUTS welcomes the proposals by a Group of Ministers to make Competition Commission of India, the sole authority to review all mergers.

        The GOM headed by Shri P.Chidambaram, Finance Minister on 21st August have recommended that not only banking mergers but all mergers will come under the jurisdiction of CCI.

        The GOM was reviewing the proposed amendments in the Competition Act, 2002 which has inter alia made are commendation to make it mandatory for CCI and sector regulators to consult each other in overlapping areas.

        CUTS had made a detailed submission to the GOM which have been accepted (http://www.financialexpress.com/news/untangling-regulatory-overlaps/963676/0).

        "Such a move by the GOM will reinforce the integrity of the economic governance system in the country", said Pradeep Mehta, Secretary General, CUTS International. "Otherwise such legislative ambiguities would have led to forum shopping and an uncertain legal environment, which would also affect the investment climate adversely".

        Furthermore, the proposed Banking Laws (Amendment) Bill pending before the parliament would also be rectified to ensure that CCI gets to review banking mergers also. Earlier, the banking bill had a provision to oust CCI's jurisdiction in so far as bank mergers were concerned.

        One major issue was that if the sector regulator oversees mergers, there is no appeal procedure available to the aggrieved parties. In the case of CCI, there is the COMPAT, which acts as the appellate tribunal.

        On the issue of overlaps, CUTS has also done a detailed study of the overlap issues for the Indian Institute of Corporate Affairs borrowing knowledge from Spain, Brazil, South Korea and South Africa (http://www.cuts-ccier.org/IICA/pdf/Synthesis_Report-Harmonising_Regulatory_Conflicts.pdf), where it has been shown how such situations have been handled adroitly. "In Europe all overlap issues are handled by mutual consultations among the competition authority and sector regulators", said Mehta. "No one quibbles about the turf issue, which is a bane in India and many other developing countries".

        At a CUTS event on competition policy on 21st August, Mr Ashok Lavasa, Additional Secretary, Ministry of Power, said that even though the Electricity Act empowers electricity regulatory commissions to check anticompetitive practices under Section 60 of the Electricity Act, 2003, he does not see any problem in amending the same so that it will only be CCI which will be the sole authority to do so.

        Commenting on the issue of mergers and takeovers in the pharma sector, where the government is still muddling, CUTS has proposed that all pharma mergers & takeovers should also be reviewed by the CCI. If the same fall below the high financial thresholds, the Competition Act can be amended to deal with such situations. "Even the Arun Maira Committee has made a similar recommendation on the suggestions of CUTS", said Mehta.

        - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
        For further information please contact:
        Natasha Nayak, Policy Analyst, CUTSat nn2@...,08290142470

        --- In FunCompForum@yahoogroups.com, Tarun Das <tarundas.delhi@...> wrote:

        >
        > I consider Martin's comment to be the last words on the ongoing debate, as Martin is a professional with not only theoretical knowledge but also practical experience in the banking sector in a matured economy like the United Kingdom.
        >
        > Tarun Das
        > World Bank Technical Expert (Linking Planning with Budgeting)
        > Ministry of Finance, Government of Bangladesh, Dhaka.
        > ________________________________________________________________________________________________________
        > To: FunCompForum@yahoogroups.com
        > From: Martin.Wolf@...
        > Date: Thu, 17 May 2012 08:10:24 -0400
        > Subject: Fwd: [FunCompForum] WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS?
        >
        >
        > If I may interject as someone who was a member of the Independent Commission on Banking in the UK.It is perfectly possible and reasonable to allow the competition authority to investigate banking. Competition is, after all, desirable in the provision of banking services, as is true of other services. But competition is not the only thing that matters in banking. The central bank has both the right and the duty to veto proposed changes if (and only if) it can credibly argue that the change in question threatens stability and that there is no remedy to this danger, other than vetoing the proposed change. Thus I would allow the competition authorities to investigate and make a determination on the competition merits, but subject to a veto by the central bank (or whoever is the relevant regulator) for prudential reasons, clearly and transparently articulated.

        > Martin
        >
        > On 16 May 2012 06:00, Somasekhar Sundaresan somasekhar@... wrote:

        > Very well put. There are so many dimensions to the issues in this debate that spin out of where it began.
        >
        > The absence of a check and balance in the form of a right to appeal decisions made in the central bank's regulatory (not monetary policy) role is one such dimension. Without Appellate oversight, decisions are cryptic, not articulated, and, presumed unimpeachable.
        > Only writ petitions remain as a very narrow and limited Constitutional right. Other regulators, the CCI in particular, has to write reasoned decisions since it would have to defend them if appealed.
        >
        > If the central bank wishes to advocate a path of being the sole regulator of any and every aspect of banking and exchange controls, it should at the minimum be willing to subject itself to an Appellate review in its regulatory decisions. That would confer some credibility to a zealous defence of turf.
        >
        > Regards,
        >
        > Somasekhar
        > Vakils House, 18 Sprott Road, Ballard Estate, Mumbai - 400 001
        > T: +91-22-4341 8504 (Direct); +91-22-4341 8600 (Extn: 504); F: +91-22-4341 8617
         

        > From: rajeev.c@... [mailto:rajeev.c@...]
        > Sent: Wednesday, May 16, 2012 10:26 AM
        > To: FunCompForum@yahoogroups.com FunCompForum@yahoogroups.com
        > Subject: Re: [FunCompForum] WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS?
        >
        > I have been following this debate with interest, especially the views of Dr Reddy and Rakesh Mohan.
        > Here are my views
        > 1. The RBI has the obvious roles of being central banker and also the banking regulator. Currently it also has a not-so-clear role vis a vis banking consumers.
        > 2. Its central bank role is obvious. Its performance in that role is mostly in public domain.
        > 3. Its performance as banking regulator is not as well scrutinized or understood - and it has had failures on its watch - GTB etc
        > 4. On the critical issue of creating competition, choice and protecting borrowers rights - Ii believe (and this is purely my personal opinion) RBI has failed to demonstrate that these are indeed high on its priority of mandates. It is obvious today to a borrower that the banking sector is far from being open. Arguably banks are operating as cartels in fixing rates etc
        > 5. And given that RBI has all these complex objectives, it would not be a bad idea for the specific issue of competition to continue to be championed by the competition regulator - as an institution that must successfully evolve into a consumer choice champion.
        > 6. This turf overlap between sectoral regulators and competition regulator is to be expected and some amount of tension is not a bad idea as long as there is an escalation and resolution definition. These are early days in the development of regulators in these areas.
        > 7. In summary, I am not in favour of giving an unquestioned carte blanche to the central bank unless they can demonstrate their capacity to address the issue of choice and competition.
        >
        > Regards
        > Rajeev Chandrasekhar
        >
        > Member of Parliament
        > Sent from BlackBerry® on Airtel
        >
        >
        > From: Amitabh Kumar amitabh.kumar@...
        > Sender: FunCompForum@yahoogroups.com
        > Date: Mon, 14 May 2012 12:51:54 +0000
        > To: FunComp Forumfuncompforum@yahoogroups.com
        > Subject: RE: [FunCompForum] WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS?
        >
        > The issue is getting a little confused in this lively debate. It is nobody€™s case that subjecting any sector to the scrutiny of CCI is a verdict on the sectoral regulator. The sectoral regulator may have impeccable credentials and unenviable history but may suffer from the mandate to ensure competition. How does the mandate of enforcing prudential norm result in to a competitive situation? Isnt the RBI expected to enforce prudential norms? Axiomatically, the focus on competition will be absent. It must be kept in mind that RBI controls one essential element of a free market, namely, entry through the power to issue licence. CCI cannot be asked to question why a licence was granted or denied. The only aspect that both CCI and RBI will have to look simultaneously is a merger. That will look at a merger through separate lenses goes without saying. It can be said with certainty that the two lenses will not be so different to cancel each others findings.
        >
        > The two authorities may, hopefully, decide to work together and make reference to each other (possibility exists in the law), which will be an ideal situation. A 2008 like scenario of Lloyds acquisition of HBOS is a different ball game, one where political-economy takes over. If a situation like this comes, the sectoral regulator as well as the competition authority may have similar views. In any case, why fret too much about such rare events?
        > Let us think of sectoral regulators and the competition authority work in harmony to uplift a faltering economy rather than take nuanced stands to drive a wedge in the regulatory space.
        >
        > Warm regards,
        > Amitabh Kumar
        > Partner
        > J. Sagar Associates I advocates & solicitors
        >  Please note that we have relocated our offices to our new address. While our old numbers will continue for next 2 months,please
        > note our new landline numbers.
        > E-224 Ground Floor, East of Kailash.New Delhi - 110065, India
        > Tel: 91(11) 4937 0600 |
        > Extn: 648  Dir: +91 (11) 4937 0648
        >
        > Mobile:
        > +91 9958670999 |
        > Fax:
        > +91(11) 4937 0617
        >
        > ________________________________________________
        >
        > From: FunCompForum@yahoogroups.com [mailto:FunCompForum@yahoogroups.com] On Behalf Of sjalan
        > Sent: Saturday, May 12, 2012 8:44 PM
        > To: FunComp Forum
        > Subject: Re: [FunCompForum] WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS?
        >
        > My views are very similar to Dr Reddy€™s and Tarun€™s.
        > Banking has to be severely differentiated from other industries. Finance is a Life giver and sine qua non for all industries and trade. If we over regulate or control it (RBI does its job admirably), we may choke the entire oxygen
        > system, leading to total collapse.
        > I am sorry if my views are too forceful for comfort of a few.
        > Regards,
        > Sudhir Jalan
        >
        >
        >
        > From: Tarun Das
        > Sent: Friday, May 11, 2012 9:29 PM
        > To: FunComp Forum
        > Subject: RE: [FunCompForum] WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS?
        >
        > I agree with views of Dr. Y V Reddy. We cannot bring every sector, particularly finance and banking, under the Competition Commission.
        > In general, the sectors which have well established regulators under the Act of Parliament should be excluded from the Competition Act. Besides, theoretically perfect competition is a utopia, and the real world
        > is neither perfect nor competitive. So we have to accept certain degree of imperfections in the sectors like finance or banking which can be judged only by the Reserve Bank of India which has established prudential norms, regulations and expertise over the
        > years.
        > Tarun Das Ph.D.
        >
        > World Bank Technical Expert (Linking Planning with Budgeting and MTBF)
        > Multidonor Funded Project on DMTBF and Strengthening Financial Accountability
        > Ministry of Finance, Government of Bangladesh, Dhaka.
        >
        >
        > To: FunCompForum@yahoogroups.com
        > From: yvenureddy@...
        > Date: Fri, 11 May 2012 13:06:02 +0530
        > Subject: Re: [FunCompForum] WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS?
        >
        > I think in UK banking was brought under Competition Act which created problems and there were efforts to reverse it.
        > In Germany also they had problems with the competition authority's jurisdiction, in resolving the problem of a small bank but performing critical functions in a specialized segment of finance.
        >
        > The lessons from crisis include three relevant ones: Finance is different; banking is special; and unlevel playing field may be prescribed for those considered too big to fail or too critical
        > for system.
        > Banking regulation and central bank as well as monetary authority may ideally not be treated as a sectoral regulator but as something more than that.
        >
        >
        > All the best.
        > Y. V. Reddy
        > Sent from my iPad
        >
        > On May 11, 2012, at 8:59 AM, SL Rao surendral.rao@... wrote:
        >
        > Very well said and this is what I had concluded some years ago on CCI and sector regulators. Banking is separate from everything else. As we saw in the USA, billions were spent to avoid economic collapse when
        > banks were overstretched "too big to fail" was a result of mergers without reference to how the Federal Reserve could regulate these new entities an how the could be managed prudently.
        >
        > This is even more true in India where banking and it's regulation are still developing.
        >
        > It is specious to compare banking with other sectors. None is so much part of government policy.
        >
        > Regards, SLRao
        >
        > S L Rao, 918022275132; 9343198450. Sent from my I pad
        >
        > On May 10, 2012, at 15:27, "Udai Singh Mehta" usm@... wrote:
        >
        > On the one hand, bank regulators possess important sector information of relevance to merger decisions, and are also in a better position to monitor behavioural remedies for mergers.
        > On the other hand, competition agencies enjoy the advantage of possessing analytical skills and judgment honed in reviewing many more mergers than bank regulators are likely to encounter. It is interesting to note that although the United Kingdom has given
        > concurrent powers to several sector regulators to enforce competition laws regarding anti-competitive agreements and abuse of dominance; it has not done so as regards merger review.
        >
        >
        > The interface between the Competition Commission vis-�-vis sectoral regulators is critical. The basic premise to be recognised is that sectoral regulators have domain
        > expertise in their relevant sectors. The Competition Commission, established under the Competition Act, 2002 on the other hand, has been constituted with a broad mandate to deal with competition for which certain very specific parameters are laid down under
        > the Act. The starting point, however, is for both to try and appreciate the difference between technical and competition issues. The sector regulators should have the leading role in regulating technical issues. Thus, for
        > structural issues, which in most cases are ex ante, sector regulators should take a leading role. But, for competition issues which are largely behavioural and
        > ex post, competition authorities should take a leading role. Let us not forget, the role of competition authority is to €˜Protect€™ competition and the role of sector regulators is to €˜Promote€™ competition, thus it is important to ensure
        > synergies between sector regulators and the competition commission. Above all, nowhere in the world, banking is exempted from the purview of the competition authority except in one or two countries, and they are not irrational in taking such a step.
        >
        >
        > Thus, a formal mechanism for coordination between the competition commission and the sectoral regulators is, therefore, of key importance. Coordination between sectoral
        > regulators and competition commission should be made mandatory through suitable provisions in the Competition Act, 2002 and sectoral laws.
        >
        > Regards,
        >
        > Udai
        > ----------------------
        > Udai S Mehta
        > Associate Director, CUTS International &
        > Centre Coordinator,
        > CUTS Centre for Competition, Investment & Economic Regulation (CUTS CCIER)
        > D-217, Bhaskar Marg, Bani Park, Jaipur-302016, India
        > Phone: +91.141.228 2821 | Fax: +91.141.228 2485| M: +91.98292 85926
        > Email: usm@... | Skype: udai.mehta
        > Website: www.cuts-ccier.org (CUTS CCIER) |
        > www.cuts-international.org (CUTS International, also at Geneva, Hanoi, Nairobi and Lusaka)
        >
        > Information contained in any e-mail transmitted from or on behalf of CUTS are confidential and intended solely for the addressee(s) and may be legally privileged or prohibited from disclosure and unauthorized use. No legally binding commitments will be created
        > by this E-mail message. CUTS may not be held responsible for the content of this email as it may reflect the personal view of the sender and not that of the organisation.
        > <image001.jpg>
        >
        >
        > From: FunCompForum@yahoogroups.com [mailto:FunCompForum@yahoogroups.com] On Behalf Of Somasekhar Sundaresan
        > Sent: 09 May 2012 19:58
        > To: FunComp Forum
        > Subject: RE: [FunCompForum] WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS?
        >
        > With all respect, I humbly beg to differ. When we have a regulator for a sector, the regulator should concern itself with its sectoral mandate. The mandate of the Competition Commission as
        > a regulator is not the same as the mandate of the sectoral regulator.
        > By this token, merg

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