Risk-weighting is more than a game, it needs a purpose too.

Sir, Patrick Jenkins reports that Lord Turner, chairman of the Financial Services Authority told the Financial Times. “We have spent a lot of time over the past two years devising a standardized definition as the numerator in capital ratios. It would be sensible now to look in more detail at the denominator and examine [the risk-weights], “Drive for global standard on bank’s lending risks” May 3.

Jenkins also writes “Inaccurate calculations of risk-weighting can have a highly disruptive effect on capital ratios, potentially making a nonsense of a global minimum capital ratio.”

The above addresses one of the issues I criticize in the bank regulations coming out of the Basel Committee and that you know I have been for many years now writing to the Financial Times about, but that you also for whatever reason had decided to ignore.

What it does not address though is the problem that even if the risk-weights are perfect, and universally applied, that could just as well bring down the world because the banks would anyhow not be taking the risks we need them to take, if for instance we are going to find jobs for the new generations. And that is what Patrick Jenkins has not yet understood even if he writes “It’s about making regulations worthwhile”, “Time to work out the real odds in the weighting game”, May 3.

I explained that in person to Lord Turner, about a year ago, when I told him he was behaving like a handicap officer on a race track who took off the weights from the best running horses and placed these on the debutants and the slow horses, without telling the bettors and the bookies, and still hoped for a great race.

I also reminded Lord Turner of that there has never ever been a major or systemic bank crisis that has resulted from the banks being involved with what ex-ante was perceived as risky; they have, except for those where illegal behavior was present, all resulted from lending and investing in what ex-ante was considered as not risky.

PS. Sir, I guess you do not have it in you to acknowledge the fact of my relentless lobbying on these issues. Oh had I just been one member of your social network!