Regulators should take the beam out of their own eyes
Sir, Richard Lambert makes a reference to a research paper by Andrew Haldane, the Executive Director for Financial Stability, and Richard Davies of the Bank of England where they evidence an increasing short-termism in the pricing of company shares and conclude by blaming it all on a market failure, “Sir Ralph´s lessons on how to end short-term capitalism” May 23.
Short-termism is indeed a serious problem that derives from human weaknesses, but Messrs Haldane and Davies should start by taking the beam out of their own eyes. The mother of all short-termism is how the bank regulators, on top of how the market favors those perceived as less risky, also, by means of their risk-weights which determine the effective capital requirements for banks, shamelessly layer on their own favoritism of the same.
For a starter that regulatory short-termism created our current crisis by pushing our banks excessively into sovereigns and triple-A rated business. Also those regulations make it much more difficult harder and much more expensive for our small businesses and entrepreneurs to access bank credit… and if that is no short-termism what is?
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