Module: | MODULE A: INTERNATIONAL BANKING
Q199: Consider the following statements regarding the Association's role in dispute resolution and market conduct:
1. The Association acts as a formal mediating body to resolve operational disputes between member banks regarding foreign exchange transactions.
2. The Association actively facilitates the adoption of the FX Global Code of Conduct among Indian wholesale foreign exchange market participants.
3. The Association holds the statutory power to revoke the banking license of any member bank that repeatedly violates the FX Global Code.
Which of the statements given above is or are INCORRECT?
2. The Association actively facilitates the adoption of the FX Global Code of Conduct among Indian wholesale foreign exchange market participants.
3. The Association holds the statutory power to revoke the banking license of any member bank that repeatedly violates the FX Global Code.
Which of the statements given above is or are INCORRECT?
✅ Correct Answer: C
🎯 Quick Answer:
Option C is correct because only statement 3 is incorrect.Structural Breakdown: The Association operates an established arbitration mechanism for member banks, validating statement 1. It also champions the FX Global Code, a set of global principles of good practice in the foreign exchange market, validating statement 2. Statement 3 is entirely false.
As a self-regulatory industry association, it has no statutory authority to revoke a banking license.
The power to grant or revoke a banking license rests exclusively with the Reserve Bank of India under the Banking Regulation Act of 1949.
Historical Context: The FX Global Code was developed globally following the 2014 foreign exchange fixing scandals, where major global banks were caught manipulating exchange rates.
The Indian Association adopted this code to ensure local markets aligned with the highest international ethical standards.
Causal Reasoning: The causal reason the Association handles dispute mediation is market efficiency.
Interbank disputes over minor exchange rate delays or miscommunications are common; resolving them via a specialized industry panel is vastly faster and cheaper than taking operational disputes to a civil court.