The regulators should regulate against unforeseen risks, not manage the foreseen.

Sir, you say that “Some crisis may be inherently unpredictable. Being aware of what we do not know should encourage a policy of taking precautions even when we see no danger” “The IMG goes to the confessional” February 10. Precisely, and that should be the role of the regulators.

Compare that with what the Basel Committee currently does, which is to act as a financial risk manager for the world, allocating risk-weights that determine the capital requirements for banks based on exactly the same information already available to all bankers, namely the credit ratings. To leverage the perceptions imbedded in the credit ratings as the Basel Committee does, is not an act of futility, it is, as proven, an irresponsible and dangerous act with serious consequences.

And please do not accept the argument that these were unforeseen consequences. The Financial Times in January 2003, long before Basel II was approved, published a letter that I wrote which concluded in “Everyone knows that, sooner or later, the ratings issued by the credit agencies are just a new breed of systemic errors, about to be propagated at modern speeds.”