If European regulators discriminate against Spain and Italy, why should not the citizens do the same?

Sir, Martin Wolf in “A step at last in the right direction”, July 4 writes that “Rational Spaniards and Italians still cannot regard a euro in their banks as being as safe as a euro in a German one, largely because elevated insolvency and break up risks evidently remain” and he forgot to add that this is also because bank regulators feel the same and require any bank to hold more capital when lending to a Spanish or Italian bank, than Germany, just because their respective sovereign has a lower credit rating.

The way we are going, with those highly distortive capital requirements, all our banks are doomed to end up gasping for oxygen and capital on the last officially perceived safe beach… probably the US Treasury or the Bundesbank.

The priority in Europe should be, urgently, to correct these outrights dumb capital requirements.