The awakening of the financial world
Sir Martin Wolf is daring and right taking on the issue “Why the credit squeeze is a turning point for the world” December 12, but perhaps it is not really the credit squeeze that makes for the inflection point, but more so the general crumbling of some financial credos that were rightly inspired by the knowledge economy but that have turned out to be so lacking in wisdom. We and especially the regulators should have known that.
The appointment of the credit rating agencies to lead the way and yet believing in that the free market would operate freely would be laughable if not for the consequences.
I pray Wolf’s article opens up an urgent debate since our bank regulators are currently, among others with Basel II, just digging deeper and deeper in the hole where we find ourselves.
All is not bad news though. One good thing that could come out of this awakening is to allow banks to be banks again. In many developing countries where the banks because of the risk adverseness introduced by the bank regulators from Basel through their minimum capital requirement formulas, are more and more financing the “risk-free” public sector and the securitized-consumers, and less and less the more risky but yet vital entrepreneurs, and so the comeback of more traditional banking is urgently needed.
The appointment of the credit rating agencies to lead the way and yet believing in that the free market would operate freely would be laughable if not for the consequences.
I pray Wolf’s article opens up an urgent debate since our bank regulators are currently, among others with Basel II, just digging deeper and deeper in the hole where we find ourselves.
All is not bad news though. One good thing that could come out of this awakening is to allow banks to be banks again. In many developing countries where the banks because of the risk adverseness introduced by the bank regulators from Basel through their minimum capital requirement formulas, are more and more financing the “risk-free” public sector and the securitized-consumers, and less and less the more risky but yet vital entrepreneurs, and so the comeback of more traditional banking is urgently needed.
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