The Securities and Exchange Board of India (Sebi) chairman CB Bhave on Friday said regulating bigger entities is a greater challenge for regulators worldwide. While addressing a function in Mumbai, Sebi chief said bigger entities have more ‘persuasive power’ making it difficult to keep a check on them. Against the backdrop of the 2008 financial crisis when the bankruptcy of leading financial institutions brought down the whole financial markets world wide, the regulator said, “Financial markets are ahead of us and the regulators should not be caught off guard.”
Bhave further said the problem of regulating big corporates is a global phenomena and not restricted to India alone. And according to the regulator, the challenges for imposing a greater regulatory oversight is further compounded by the fact that these large entities use media and politicians to work around regulations.
“Their political and media access is tremendous and, therefore, regulators are going to be at the receiving end whenever they try and do something about these big entities,” he said, adding that the whole world is currently grappling with this issue and has not found an answer to it. They have tremendous ability to work around regulation and it will be interesting to see how this gets handled in the days to come,” he said.
The collapse of Lehman Brothers, Bearn Sterns and other leading banks and financial institutions in the West had created crisis of confidence leading to a major liquidity crisis worldwide. Subsequently, financial market regulators globally have attempted to bring ‘too big to fail’ institutions under greater regulatory oversight requiring them to have more disclosures. Further they have also tried to reduce excessive leverage in the system and bring more products traded on the Over The Counter (OTC) markets under the exchange trading platform to avoid counter party risk and ensure more transparency in the financial market functioning.