Bank regulators should keep it simple, and not allow complexity to distract them from their real business.

Sir, as you know by now, I agree completely with the need for simplifying bank regulations, like recently suggested by Andrew Haldane, and now also strongly supported by Sebastian Mallaby, “Regulators should keep it simple”, September 5. 

But, my reasons for doing so, are not really because the issues are too complex, and the data is too hard to gather, but because the regulators have no role playing risk-managers to the world, and thereby risk adding distortions to the markets; their role is to prepare for when complex risk-management fails. 

Look at what happened! Bankers react of course to the perceived risks, by means of interest rates, amounts of exposure and terms of loans, and so, when too creative busybody regulators came along and used the same perceived risks to set their capital requirements; the whole banking sector overdosed on perceived risks… and so now we have a crisis because of obese dangerous bank exposures to what was perceived as absolutely safe, and anorexic bank exposures to what was officially perceived as “risky”, like small businesses and entrepreneurs. 

There is an economic war raging, so we need ministers and bank regulators with vision, not janitors and nannies!