If the visible banks are not rationally regulated, there is no choice for the real economy than to run for the shadows.

Sir, the risk weight function which determines the current capital requirements for banks are based on two monumental mistakes.

The first mistake is that for reasons of simplification the Basel Committee oversimplified and decided that the expected unexpected losses of those perceived as safe will be much less than the expected unexpected losses of those perceived as “risky”. And that means that the perceptions of risks will either reward or punish… twice.

The second mistake is that the risk weights are “portfolio invariant” and which means these do not take account of the added risks of asset concentration, or the dissipation of risks by means of diversification. And that means that the risk of the banking system might be increasing exponentially, even while being reported as safer.

And all this leads to banks then earning higher risk-adjusted returns on equity when lending to the “safe” than when lending to the “risky”.

And the direct result is that those perceived as “safe” will have a subsidized access to bank credit, paid by negating the same to those perceived as “risky”.

And that guarantees banks will not be able to assist in helping the economy to get out of a secular stagnation, as alerted by Lawrence Summers in “Washington must not settle for secular stagnation”, or to avoid that weak destabilizing growth to which Edward Luce refers to in “Anglo-Saxon trumpeting will strike a hollow note” January 6.

And, while these regulatory discrimination against medium and small businesses, entrepreneurs and start ups remain in force, then Italy, instead of becoming more like Germany in order to prosper, as Wolfgang Münchau proposes in “What eurocrisis watchers should look for in 2014”, would do well becoming even more Italy and run into the shadows of its economía, finanza e banca sommersa.