May 26, 2014

High noon to end Basel Committee's populist risk-weighted capital requirements for banks.

Sir, John Dizard quotes Christopher Whalen, senior managing director at Kroll Bond Rating Agency saying:“FSOC is the leading boring example of boring but cumulative changes in the regulatory system that are forcing us into deflation. Nobody seems to be paying any attention, but this is having a chilling effect on credit.”, "High noon for Dodd-Frank reform", May 26.

But also, because of the risk-weighted capital requirements, with respect to bank credit to "the risky", like to medium and small businesses, entrepreneurs and start ups, it has been more than chilly, for much too long; resulting in that bank credit to "the safe" sovereigns, AAAristocracy or the housing sector, has been too hot. And in consequence, with respect to the whole Basel regulatory paradigm, it is way high-noon for a reform.

On FT's first page we find an article that proclaims "France's FN leads surge of populists" which implicitly assumes somebody knows what is not populism nowadays. We would like to know that. I say this because as I see it the whole concept of risk-weighting, as if trusting you could order some risk-weighing that leads to more safety an greater stability, is as populist as populist comes.

You want your kids to be safe? Order them to stay in bed, all the time...and then see what really great dangers that entails!