The “risky” are the European untouchables.

Sir, John Plender is absolutely correct when he identifies the officially “risky”, the emerging economies of eastern Europe and small and medium sized businesses, already penalized by the Basel capital regime, as the biggest victims of the ongoing deleverage, “Europe faces vicious circle of disorderly bank deleveraging” April 25. 

The World Bank and the IMF during their recent spring meetings were all dressed up in signs that asked about “reducing gaps”. And indeed, one gap that surely needs to be closed, and where the World Bank and the IMF should be at the forefront, is the one odiously increased by senseless bank regulators, between those perceived ex-ante as “not-risky” and those similarly perceived as “risky”. 

Unfortunately no one made a big point of this during these spring meetings as they were all busy talking about the scarcity and the need of “safe-assets”. Clearly, those perceived by the regulators ex ante as “risky”, in Europe, are a new class of untouchables.