Europe, a perfect disunion of useful banks, is much better than a perfect union of useless banks

Sir, Wolfgang Münchau holds that “Europe should say no to a flawed banking union”, March 17.

Indeed, I agree, but not so much for the reasons Münchau holds.

Current risk based capital requirements allow banks to obtain higher risk adjusted returns on equity when lending to the safe than when lending to the risky. And that distorts completely the allocation of bank credit to the real economy. And banks which do not allocate bank credit efficiently are useless banks.

And in reference to bank unions, nothing sounds as systemic dangerous than a perfect union of useless banks. Were regulators to make amends for their mistake, then Europe would anyhow be much better off than today with a perfect disunion of useful banks.