India's financial markets will increasingly be affected by global events and changes to worldwide regulation, especially those introduced after the 2008 financial crash, a new report published here has claimed.
The report published by the City of London Corporation, which gauges London's financial Square Mile, and carried out by Indian research consultancy IMRB International, was based on interviews of 33 high-level representatives from India's financial and professional services sectors, including banks, law firms and credit rating agencies.
"As India's economy continues to steam ahead, the impact of global regulation on its financial markets will need ever closer scrutiny and evaluation," the report titled 'The Impact of Global Regulatory Change on India's Financial Markets', said.
"This report shows that as India's capital markets do not exist in isolation, international regulation, and how it is applied, potentially could stifle the growth and development of emerging financial markets," said Mark Boleat, policy chairman at the City of London Corporation.
"Given India's importance to global economic growth, I hope this report gives some extra valuable input to global financial regulation policymakers," he noted.
During the interviews, the respondents were asked about global financial regulations, with a particular focus on European and US reforms such as Basel III, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Foreign Account Tax Compliance Act (FATCA) and the UK's Bribery Act.
They were asked to reflect on how they were perceived in India, the awareness levels and impact of each on India's capital markets.
Basel III, because of its global nature, was viewed to have the biggest impact on banks and financial institutions.
This was seen as likely to result in changes to business models and customer strategy and also an increased cost of compliance.
There was, however, no particular opposition towards Basel III in India.
FATCA was seen to impact on all financial institutions with business interests in the US and would incur changes and costs as result of the business process introduced - especially 'Know Your Customer' requirements.
The UK's Bribery Act 2010 was viewed as particularly stringent and has resulted in corporates and multinational banks incurring high costs on risk mitigation activities.
The Dodd-Frank Act's impact, with the exception of the Volcker Rule, was unclear across many respondents.
In general, the City of London Corporation believes that the report highlights the importance of effective global integration of regulation, with principles such as the need for simplification, the creation of a global playing field and a reduction in the stringency of regulation in some business areas recommended by the interviewees.
