Focus on legal audit: RBI Dy Gov

Reserve Bank of India (RBI) Deputy Governor Shyamala Gopinath today stressed on the importance of legal audit in all financial institutions to review various agreements with the custodians, counterparties and service providers. Delivering the inaugural speech at a symposium on 'Changing Dynamics of Legal Risks in Financial Sector' as part of the Platinum celebrations of the RBI here, Ms Gopinath said ''in the light of various developments in the fast changing financial markets during the recent crisis, the importance of legal audit in all financial institutions cannot be overemphasised.'' Enumerating the advantages of legal audit, Ms Gopinath said it was a health check of the level of risk that could arise due to insufficient or inappropriate documentation or lack of understanding laws of a foreign land. It was also a means for identifying legal risks and suggesting course correction for 'smoother sailing during the crisis.' Ms Gopinath said the recent global financial crisis had brought to light various risks and to a great extent blurred the distinction between operational and legal risks. '' Some of the key legal risks faced by the entities in the recent financial crisis related to bankruptcy risks, mis-selling of complex derivatives and enforceability of contracts/agreements backing OTC transactions across jurisdictions and the hitherto untested risks in the securities market -- custodial arrangements, repo transactions, tripartiate agreements, securities lending etc,'' she added.

-- (UNI) -- 30MS22.xml

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