Some banks more powerful than central banks: Reddy

They (international banks) have often been found to deal in financial flows of suspect legality in one country,though not always in both countries involved. International banks have the opportunity and incentive to conduct operations involving tax avoidance. Because of these operations,international banks enjoy significant influence over the political economy in several countries, Reddy said,while delivering the Per Jacobsson Foundation Lecture 2012 yesterday in Basel,Switzerland. In the prevailing environment of global financial markets,some large global financial conglomerates are larger and,perhaps,more powerful than some of the central banks, said the former chief of the RBI.

On policy front,Reddy said that available evidence shows that financial contributions to political activity from the financial sector in many affected countries (from economic crisis) increased significantly in recent years.

Moreover,large global financial conglomerates seem to be in a position to influence not only political governance but also corporate governance,to suit their own interests.

While Reddy did not name any country in his speech,his remarks mostly appear to be targeted at Western countries.

However,the role of rating agencies and accounting firms have been criticised on various platforms in India as well.

Speaking on the issue of society,economic policies and the financial sector,Reddy said that the concentration of global financial power in a few entities with close mutual connections has considerable potential to undermine competitive forces.