It was the firemen who, unwittingly, planted and incendiary AAA-bomb in our banks

Sir, John Gapper in “The banking firemen won´t prevent fires breaking out” July 26, mentions the need for bank supervisors to prevent banks from taking excessive risks…” 

Again I must remind him that this was not a crisis because of “excessive risks”, but a crisis that resulted from an excessive trust by regulators in the perceptions of risks, and of an excessive importance given also by regulators to these perceptions in the capital requirements for banks, when they ignored that these risk perceptions were already cleared for in so many other ways. 

Gapper refers to “Most supervisors admit they were too lax in the past… their job was to identify risks, and bring them to the attention of bank executives, but not tell them what to do.” Precisely, the problem though, is that these regulators have not yet understood that with their risk-weights that define the capital requirements they are, de-facto, telling a banker what to do. 

And so, in this case it was the firemen who, unwittingly, planted and incendiary AAA-bomb in our banks… and the firemen are still out there stoking the fire with their revised risk-weights.