December 09, 2013

“Lazy banking” is not just an Indian phenomenon. The Basel Committee has decreed it to rule everywhere.

Sir, James Crabtree in his interview of Arundhati Bhattacharya “Toughest job in Indian banking for head of state-backed behemoth”, December 9, refers to the challenge “to shake off India´s reputation for what is known as ‘lazy banking’, a system in which stolid lenders, led by cautious bureaucrats, park deposit in ultra-safe government securities”.

I am sorry, described that way “lazy banking” does not solely happen in India. In fact the Basel Committee, with their risk weighted bank capital requirements, which allow banks to earn much higher risk-adjusted returns on assets perceived as “absolutely safe”, than on assets perceived as “risky”, have in fact decreed lazy banking to rule everywhere.