God help us, our bank regulators have really been taken for a ride!

Sir, Brooke Masters in “Regulators agree extra bank capital protection” June 27, reports that now the “global systemic important financial institutions”, G-SIFIs, have convinced the bank regulators that, for a mere 1 to 2.5 percent additional capital, to be paid in easy installments until 2019, and to be applied on risk-weighted assets, to formally award them the franchise of “Too big-to-fail”. What a sad day… for us and for all those other banks that at this moment have been deemed “global systemic irrelevant financial institutions”

And let us calculate. Since the risk weights for investments in private triple-A rated securities are still 20 percent that would dilute the maximum basic capital requirement of 9 percent to signify only a mere 1.8 percent and so the “too big to fail banks” could still leverage themselves 55 times to one, when doing that kind of business… and not to speak of what they could leverage when lending to some sovereigns with a zero risk weight. God help us, our bank regulators have really been taken for a ride!

And Jean-Claude Trichet, European Central Bank President, stepping down as chairman of the Basel overseers group is quoted saying “The agreement reached today will help address the negative externalities and moral hazard posed by global systemically important banks”, Sincerely from a nanny we should only expect she cares for the risks perceived, but, from our regulators we have the right to expect they care for the risks that are not perceived.