Loading ...
Sorry, an error occurred while loading the content.

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

Expand Messages
  • Martin Wolf
    ... From: Martin Wolf Date: 17 May 2012 08:08 Subject: Re: [FunCompForum] WILL RBI BE A BETTER JUDGE FOR BANKING MERGERS? To: Somasekhar
    Message 1 of 3 , May 17, 2012
    • 0 Attachment
      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

      Attribute brevity to Blackberry
      -----------------------------------

      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 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

       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
       
      Please consider the environment before printing this email 

      CONFIDENTIALITY INFORMATION AND DISCLAIMER
      ________________________________________________

      This communication being sent by the offices of J. Sagar Associates is privileged and confidential, and is directed to and for the use of the addressee only. If this message reaches anyone other than the intended recipient, we request the reader not to reproduce, copy, disseminate or in any manner distribute it. We further request such recipient to notify us immediately by return email and delete the original message. J. Sagar Associates does not guarantee the security of any information transmitted electronically and is not liable for the proper, timely and complete transmission thereof. Opinions, conclusions and other information in this communication that do not relate to the official business of J. Sagar Associates shall be understood as neither given nor endorsed by it.

      ________________________________________________

      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, 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
      Vakils House, 18 Sprott Road
      Ballard Estate,  Mumbai 400 001. India
      T: +91 22  4341 8504 (Direct) | T: +91 22  4341 8600 - Extn: 504 (Board) | F: +91 22  4341 8616 / 17 

      ___________________________________________________________________________________________

      CONFIDENTIALITY INFORMATION AND DISCLAIMER

      This communication being sent by the offices of J. Sagar Associates is privileged and confidential, and is directed to and for the use of the addressee only. If this message reaches anyone other than the intended recipient, we request the reader not to reproduce,copy, disseminate or in any manner distribute it. We further request such recipient to notify us immediately by return email and delete the original message.

      J. Sagar Associates does not guarantee the security of any information transmitted electronically and is not liable for the proper, timely and complete transmission thereof. Opinions, conclusions and other information in this communication that do not relate to the official business of J. Sagar Associates shall be understood as neither given nor endorsed by it.

      _________________________________________________________________________________

      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/




      --

      Martin Wolf
      Chief Economics Commentator






      --

      Martin Wolf
      Chief Economics Commentator



      **********************************************************************************
      This email was sent by a company owned by Pearson plc, registered office at 80 Strand, London WC2R 0RL.
      Registered in England and Wales with company number 53723
    • Savita Hanspal
      I agree with your stance too. An authority established to deal with competition issues should be able to do so for all sectors. Each sector will have their
      Message 2 of 3 , May 19, 2012
      • 0 Attachment
        I agree with your stance too. An authority established to deal with competition issues should be able to do so for all sectors. Each sector will have their peculiarities-so would that mean that the CCI will not be able to deal with them?

        In any case, the Competition law provides for including the parties involved, specific sector experts, consumers/consumer representatives and also explains the role of sector regulators in the hierarchy of decision making. These should have been considered before questioning CCI's authority and role.

        Dr Savita Hanspal
        Associate Professor, Kamala Nehru College
        Presently Faculty at College of Strose, NY, USA

         
        On May 17, 2012, at 8:10 AM, Martin Wolf wrote:
         
        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

        Attribute brevity to Blackberry
        -----------------------------------

        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 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 
        <image005.jpg>   
        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
         
        Please consider the environment before printing this email 

        CONFIDENTIALITY INFORMATION AND DISCLAIMER
        ________________________________________________

        This communication being sent by the offices of J. Sagar Associates is privileged and confidential, and is directed to and for the use of the addressee only. If this message reaches anyone other than the intended recipient, we request the reader not to reproduce, copy, disseminate or in any manner distribute it. We further request such recipient to notify us immediately by return email and delete the original message. J. Sagar Associates does not guarantee the security of any information transmitted electronically and is not liable for the proper, timely and complete transmission thereof. Opinions, conclusions and other information in this communication that do not relate to the official business of J. Sagar Associates shall be understood as neither given nor endorsed by it.

        ________________________________________________

        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, 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
        Vakils House, 18 Sprott Road
        Ballard Estate,  Mumbai 400 001. India
        T: +91 22  4341 8504 (Direct) | T: +91 22  4341 8600 - Extn: 504 (Board) | F: +91 22  4341 8616 / 17 

        ___________________________________________________________________________________________

        CONFIDENTIALITY INFORMATION AND DISCLAIMER

        This communication being sent by the offices of J. Sagar Associates is privileged and confidential, and is directed to and for the use of the addressee only. If this message reaches anyone other than the intended recipient, we request the reader not to reproduce,copy, disseminate or in any manner distribute it. We further request such recipient to notify us immediately by return email and delete the original message.

        J. Sagar Associates does not guarantee the security of any information transmitted electronically and is not liable for the proper, timely and complete transmission thereof. Opinions, conclusions and other information in this communication that do not relate to the official business of J. Sagar Associates shall be understood as neither given nor endorsed by it.

        _________________________________________________________________________________

        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/

      • Tarun Das
        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
        Message 3 of 3 , May 19, 2012
        • 0 Attachment

          I consider Martin's comment to be the last words on the on-going 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
          Attribute brevity to Blackberry
          -----------------------------------

          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 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

           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
           
          Please consider the environment before printing this email 

          CONFIDENTIALITY INFORMATION AND DISCLAIMER
          ________________________________________________

          This communication being sent by the offices of J. Sagar Associates is privileged and confidential, and is directed to and for the use of the addressee only. If this message reaches anyone other than the intended recipient, we request the reader not to reproduce, copy, disseminate or in any manner distribute it. We further request such recipient to notify us immediately by return email and delete the original message. J. Sagar Associates does not guarantee the security of any information transmitted electronically and is not liable for the proper, timely and complete transmission thereof. Opinions, conclusions and other information in this communication that do not relate to the official business of J. Sagar Associates shall be understood as neither given nor endorsed by it.

          ________________________________________________

          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, 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
          Vakils House, 18 Sprott Road
          Ballard Estate,  Mumbai 400 001. India
          T: +91 22  4341 8504 (Direct) | T: +91 22  4341 8600 - Extn: 504 (Board) | F: +91 22  4341 8616 / 17 
          ___________________________________________________________________________________________

          CONFIDENTIALITY INFORMATION AND DISCLAIMER

          This communication being sent by the offices of J. Sagar Associates is privileged and confidential, and is directed to and for the use of the addressee only. If this message reaches anyone other than the intended recipient, we request the reader not to reproduce,copy, disseminate or in any manner distribute it. We further request such recipient to notify us immediately by return email and delete the original message.

          J. Sagar Associates does not guarantee the security of any information transmitted electronically and is not liable for the proper, timely and complete transmission thereof. Opinions, conclusions and other information in this communication that do not relate to the official business of J. Sagar Associates shall be understood as neither given nor endorsed by it.

          _________________________________________________________________________________

          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/

        Your message has been successfully submitted and would be delivered to recipients shortly.