June 27, 2016
June 26, 2016
Sir, Ben McLannahan and Gillian Tett write that the US Federal Reserve reported that “Every one of the 33 US banks that took the first part of the annual “stress test” passed it” “US lenders face higher stress test hurdle”, June 25.
That is good news. But the bad news though is that, as I have said time after time, those stress tests are incomplete. They only include what is on the balance sheets of banks, and not what these should include but perhaps do not include. And that means that the all-important social role of banks of allocating credit efficiently to the real economy is completely ignored.
If banks run into problems because of allocating credit in accordance to the needs of the real economy, that is a much lesser problem than if the real economy does not have adequate access to bank credit.
What do I suggest? Analyze for example the evolution of how many credits, not guaranteed with house mortgages, have been given over the years to “risky” SMEs and entrepreneurs, and I am sure you will be shocked with how the credit risk weighted capital requirements for banks have distorted.
Embracing some inefficiency and duplication will improve resilience and recovery; and will reduce system fragility.
June 23, 2016
FT, you seem to exploit the needs and wants of the young only when it suits you, like today when fighting Brexit
June 22, 2016
It behooves us to stress-test our main bank regulators; the Basel Committee and the Financial Stability Board
Loony and statist bank regulators are destroying the opportunities of the real economy to sustain decent pensions.
Hardheaded bank regulators still believe they’re up against the expected while the real enemy is always the unexpected
June 20, 2016
And now, decades too late, FT publishes an article by LBS’s David Pitt-Watson mentioning that finance needs a purpose
June 19, 2016
In sovereign debt should not moral and ethical issues be more important than collective and pari passu clauses?
June 18, 2016
Bank regulators minimizing the social impact of banks more than neutralize the social impact maximizing investors.
June 16, 2016
Since you cannot put up a Leave Britain to referendum, you must force your Parliament to act more forcefully in EU
June 14, 2016
Please help save us from regulators applying their standardized risk models to all banks… that would be the end
PS. To top it up... their risk-weights were portfolio invariant
June 13, 2016
FT, when will you stop lying about “a light-touch oversight of financial markets before the 2008 crash”?
Basel Accord’s risk weights subsidized sovereign bonds, so since then these were no longer proxies for risk free rates
Sir, Michala Marcusssen argues that because of quantitative easing and negative interests “the proxies of sovereign bond yields for the “risk-free” rate of return is becoming an increasingly imperfect substitute with potentially dangerous consequences” “The demise of the ‘risk-free’ rate in markets”, June 14.
Marcussen refers to “a new debate on how to treat sovereign debt on bank balance sheets. At present, sovereign debt enjoys favourable treatment not just in the euro area but across the globe. Basel III allows (but does not mandate) a capital requirement of 0 per cent for sovereign bonds”
Not exactly, as I have often written to FT, the problem of a not valid proxy for the risk-free rate originated much earlier, soon 30 years ago.
The Basel Accord of 1988, Basel I, set the risk weights for sovereigns at zero percent and that of citizens at 100 percent. Since that signified a regulatory subsidy of sovereign debt, ever since we have not have had a reasonable proxy for a risk free rate.
The problem with banks holding too much sovereign debt is that no one dares tackle the regulatory favoritism of it.
A “Bye-bye-Basel” that frees Britain from dangerous credit risk aversion, would more than compensate Brexit costs.
June 12, 2016
Of the demand for sovereign debt, how much comes from the free market, and how much from regulatory distortions?
Europe - Eurozone stands no chance against the regulatory manipulation of how bank credit is allocated to its real economy.
June 10, 2016
As a Venezuelan, I would sure like to know who those financing those who are destroying my country are
ECB’s Mario Draghi, regulating in favor of the old and against the young, should be ashamed of mentioning demographics.
June 09, 2016
June 08, 2016
Make sure Greek banks can lend to the risky private sector, in reasonable amounts, against low capital requirements
June 07, 2016
IIF confesses the distortions in the allocation of bank credit caused by Basel’s risk weighted capital requirements
June 06, 2016
A Universal Basic Income, a Societal Dividend, needs always to be slightly small, so as never risk being too large.
June 04, 2016
June 02, 2016
It is not Draghi v the banks; it is Draghi and his regulation colleagues v SMEs, entrepreneurs and the real economy.
June 01, 2016
“With a basic income, the numbers just do not add up” Do not add up for whom, for the redistribution profiteers?
And let us not forget that the Universal Basic Income is in much re-injected into the real economy, which could help it to grow and generate jobs.
Regulators, your risk management, need to start by asking: What risks can we not afford the banks not to take?
May 31, 2016
If IMF seems to favor the private sector, rest assure it is favoring even more its shareholders, the governments.
May 30, 2016
In the midst of the Venezuelan pandemonium, is not selling petrol at less than $2 cents a liter a crime?
FT, more bank credit to “safer” grown-up trees, and less to “riskier” green-shoots, must result in lower productivity
May 28, 2016
The “peak end” rule factor is very dangerous. It fools us into interpreting ex post resulting risks, as real ex ante risks.
Bank regulators are financially advising Europe as that “grandmother” Pope Francis considers Europe now is
May 27, 2016
Universal Basic Income is a Societal Dividend, paid mostly by reducing the margins of the redistribution profiteers
Universal Basic Income is not about assigning governments more power. On the contrary it is about wrestling redistribution powers from their hands.
Mexico needs carbon and petrol tax, which revenues are all redistributed by a Universal Basic Income mechanism.
Mexico needs to align incentives on pollution
Ms Webber writes: “Mexicans are snapping up cars as fast as the world’s seventh largest producer can churn them out . . . Domestic consumption is the engine of economic growth so there is no official incentive to dissuade people from buying Mexican-built cars and associated products such as petrol.”
That’s really not the case. You must build up the right political and economic incentives to correct for it. If Mexico imposed carbon tax, petrol tax and a strong traffic toll system, and made sure all the revenues from it were immediately returned to the economy by means of a universal basic income, you would face a different reality. Then you would have aligned the incentives for pollution control and the fight against climate change with the fight against inequality, and that makes for a very powerful alliance.
Standing in the way, besides initial protests from car owners, would be the redistribution profiteers who would miss a chance to make political and economic capital. Just as in Venezuela.
Published in FT