Mumbai : Emphasising the need for better coordination among financial regulators globally, SEBI Chairman U K Sinha said markets have gone beyond the control of policymakers post 2008 credit crisis.
Addressing the BRICS bond markets summit, Sinha said after the 2008 financial crisis, the unconventional policies that global central banks are following have created serious challenges and uncertainties in global bond markets, report agencies. The uncertainties have become so large that “today financial markets are beyond the control of national policymakers,” he opined. “Given the volatile nature of capital flows, any sneezing by the central banks can create wide fluctuations in the bond market,” he said.
Calling for better coordination between global regulators, Sinha said a good beginning can be started among the BRICS regulators and other policymakers. “BRICS should come together to share their experiences from bond markets and perhaps, also develop a BRICS bond market,” he said. On the undeclared currency wars, primarily led by China, he said competitive devaluation of currencies is also impacting the markets, especially those which are export-oriented.
Commenting about the balance sheets of central banks like the US Fed, the European Central Bank, Bank of England and Bank of Japan, he said that they have been following near-zero or even negative interest policies which have become too large. “These central banks have blown up their balance sheets by USD 7.2 trillion since the 2008 global credit crisis. There are also serious flaws in monetary transmission due to these unconventional policies. The broad money supply has increased by over USD 9 trillion, but the actual flow to the corporate sector is hardly USD 1.8 trillion,” Sinha said.
Sinha also expressed concern over the prevailing negative interest rates in many of the large economies, saying they are also creating uncertainties in the market. “A bond market can only develop if there is international interest in the bond market, but the easy money policies and negative interest rates in some markets are creating uncertainties,” Sinha observed.
