ECB should foremost help to eliminate, not neutralize, the distortions produced by risk based capital requirements for banks.

Sir I refer to Martin Wolf’s “The spectre of eurozone deflation” March 12. In what can be done about that threat Wolf mentions that “the ECB… should announce a longer-tem refinancing operation to unblock the flow of credit to small and medium sized enterprises”.

Sir that indicates that Wolf still refuses to acknowledge the fact that credit has been blocked to these borrowers, not by a lack of funds, but because banks are required to hold more capital against loans to them, and this only because regulators decide these are much riskier than loans to the “infallible sovereigns” or to the AAAristocracy, and feel they have the right to intervene and distort.

Well no, until the horrendous regulatory mistake committed by Basel regulations is fully recognized, and a careful plan out of the imbroglio has been executed... any independent ECB effort to neutralize the distortions could make matters worse.

PS. Sir, You decide whether you want to copy Martin Wolf with this or not. I will not since he has asked me not to send him any more comments related to the capital requirements for banks, as he understands it all… at least so he thinks.