December 11, 2012

Well done Janan Ganesh! Perhaps now you’d be willing to go after bank regulators

Sir, Janan Ganesh’s “Politicians are failing to grasp the point of business” December 11 is an example of clear writing “without fear and without favour”. Well done!

I wonder why no one, in the same vein, has been willing or daring enough to produce a similar “Regulators are failing to grasp the point of banking”.

In such a piece its author could denounce that the role of the regulators is not to act as a risk manager for the banks, like when handing out exaggerated and distorting incentives for the banks to dangerously embrace too much what is considered as absolutely safe. 

And this not only because risk-taking is the oxygen of any development but also, as regulators should have learned in any bank-regulations 101 course, that it is only what is perceived ex-ante as absolutely not risky, which produces the kind of exposures that can result in truly major bank crises.