If banks use “big data”, which is good, regulators must stay away from it.

Sir, I completely agree that banks should use all information available to make judgments on credit worthiness, as is described by Patrick Jenkins in “Big data lends new Zest to banks’ credit judgments” June 24. That can only help them to allocate credit better.

What I cannot accept though is that bank regulators should use precisely the same data to decide upon the capital requirements for banks… for two reasons.

First, by giving extra weight to information already cleared for, they can only distort the allocation of bank credit.

Second, Jenkins refers to “know your customer”, and in this respect it is important for regulators to remember that their concern should not be with the clients of banks defaulting, but with the banks defaulting, which is of course pas la même chose… as banks mostly default because of excessive exposures to what was erroneously perceived as absolutely safe.