To reiterate from the FSAP (Para 39 in Summing up Responsibilities, Objectives, Powers, Independence, and Accountabilities, the Basel Core Principles Detailed Assessment Report): “Legislation should be amended to enable the RBI to extend all the powers currently exercised over private sector banks to PSBs; in particular, regarding Board member dismissals, mergers and license revocation.
Isn’t there a great danger that the ECB’s stance undermines the necessary adjustments in the economy, as the cheap money makes balance sheet adjustments unnecessary or keeps unviable banks and businesses alive? Some critics warn that the ECB is ultimately creating “Japanese conditions”. That is certainly not the case. Of course, no policy is completely “clean” – there are always side effects.