November 07, 2012

Are Basel bank regulators sadists?

Sir, Michael Stothard reports that “Corporate bonds get ready for Basel boost” November 7, as banking regulators are now thinking of also allowing single-A rated bonds to be held for banks in compliance of the new liquidity rules. And this though, “The corporate bond market hardly needed another lift. Central bank bond buying has already stoked strong demand for global credits, allowing companies to borrow at all-time low rates”.

What is wrong with the bank regulators? I can’t believe they can be so dumb. Are they sadist? Do they not understand that for every little new preference they dole out to some bank investment in what they perceive as not risky, or less risky, “The Infallible”, they are making it so much harder for those officially perceived as "risky" to access bank credit.

“The Risky” includes of course all those unrated small businesses and entrepreneurs out there, and which bank credit needs we are very much interested the banks serve well, as these borrowers could be those best suited to help us to find the new generation of jobs for our young.

And besides, all regulators achieve with their discrimination, is to artificially decrease the return for other than bank investors when investing in reasonable safe securities. What do the regulators want? That widows and orphans perform the economic resource allocation function of banks?

And, FT, how long are you going to remain in conspiratorial silence about this regulatory lunacy?