The proposed regulatory framework for the registration and oversight of rating agencies – with an important role for the Committee of European Securities Supervisors and the Committee of European Banking Supervisors – goes in the right direction. I also welcome the Commission’s initiative to launch a public consultation on hedge funds, to which the Eurosystem will contribute.
Suppose, a typical Indian bank has RoE of 15% and interest paid on non-equity elements of capital is 10%. Further, suppose that the equity to RWAs ratio of the bank is 6%. Now if the bank is required to maintain an additional 1% equity, the weighted average cost of funds would rise by 5 basis points only.