Basel II and III demonstrate ‘a lack of ambition and a willful blindness to the future’

Sir, Stian Westlake opines that “we live in an age where businesses and governments seem gripped by a lack of ambition and a willful blindness to the future”, “The west desperately needs more madcap schemes”, August 17.

Indeed, “a lack of ambition and a willful blindness to the future” does well describe current bank regulations which, because of capital requirements based on perceived risk” allow for banks to earn much more expected risk adjusted returns on their equity when financing The Infallible, like the sovereign and the AAAristocracy, than when financing The Risky, like medium and small businesses, entrepreneurs and startups.

Those regulations have placed sort of a reverse mortgage on our economy, which allows us to extract as much as possible of equity from the old risk-taking, while at the same time making it too onerous for banks to help finance the new risky ventures that must occur, if we are to move forward... if our young are to stand a chance to find jobs.

What a sad reality. From praying “God make us daring” in our churches, we now have ended up with castrated banks.