If only the Basel Committee had known more about behaviouralism

Sir, Ken Fisher writes: “Humans hate losses more than twice as much as they love gains – a 10 percent loss feels as bad as a 25 percent gain feels good. That´s proven behaviouralism”, “Gridlocked governments are good news for equity”, November 18.

Of course he is right. How sad the bank regulators in the Basel Committee did not consider this when they designed their capital requirements which require higher capital for lending when the perceived risk of default are high, and allows for much lower capital for lending when the perceived risks of default are low. Of course, those regulations, only lent further impetus to the creation of a bank crisis, those which always result from excessive lending to what is perceived as having a low risk, and never result from excessive lending to what is perceived as having no risk.