John Kay, we all wish regulators had regulated based on bankers’ behavior

Sir, John Kay in “Finance needs trusted stewards, not toll collectors” July 23, writes of a new regulatory approach introduced in the 1970s and 1980s “based on behavioral regulation”. 

Not so, though we sure wish they had done just that. If so, regulators would have set the capital requirements for banks based on how bankers behave with respect to perceived risk, instead of as they did, based on the perceived risks.. and as if no one was perceiving these. 

And if regulators knew bankers as well as Mark Twain did, “those who lend you the umbrella when the sun shines and want it back when it looks like it is going to rain” then they could have set the capital requirements slightly higher for what is perceives as absolutely not risky, instead of the immensely lower, and then the world would not have fallen into this “safety” trap crisis.