Risk weighted capital requirements for banks means some will receive too much credit, too cheap, others too little, too expensive.

Sir, John Plender in “How to spend $2.8tn of corporate cash” FTfm January 27, writes “The financial sector is there to intermediate between those with surplus funds and those who wish to invest. It can be relied to do so”

Not so fast Mr Plender. The most important financial intermediaries, the banks, are kept from efficiently allocating credit in the real economy, as a result capital requirements based on perceived risk. In fact, since banks can lend to “the infallible” against very little capital, the lending to “the risky”, which requires much more capital, is coming to a halt.

But seemingly the regulators are blissfully unaware of that it is them who are distorting. I say this because Christopher Thompson writes “Non-financial corporate loans in have fallen… creating a headache for regulators keen to encourage lending,, especially to small and medium sized businesses, which provide the bulk of Europe´s employment” “Balance sheets hint at EU bank confidence”, also January 27.

A “headache for regulators”, Europe has indeed fallen in the hands of a real inept bunch of bank regulators. What about the pain of the unemployed?