Sir, Kara Scannell, James Shotter, Daniel Schäfer and Alice Ross report on how New York attorney-general Eric Schneiderman is investigating unfairness in the financial markets, “Banks hit by dark pools probe” July 30.
But Sir, you know that those perceived as “absolutely safe” from a credit risk point of view, and who are therefore already the beneficiaries of lower interest rates, larger loans and on softer terms, get even lower interests, even larger loans and on even softer terms, because regulators allow banks to hold less capital against assets deemed as absolutely safe.
And you also know that those perceived as risky from a credit risk point of view, and who are therefore already paying higher interest rates, getting smaller loans and must accept harsher terms, are charged even higher interests, get even smaller loans and must accept even harsher terms, only because regulators require banks to hold more capital against assets deemed as risky.
And so I ask you Sir, does not the regulatory distortion produced by the risk-weighted capital requirements cause more unfairness in the capital markets than all the dark pools, and all the high frequency trading, and all the Libor manipulation and all the other misdeeds currently scrutinized put together? Of course it does!
What a shame there are no Attorney Generals willing to stand up to bank regulators discriminating based on perceived risk (in the Home of the Brave) … even when equipped with such formidable tools as the Equal Credit Opportunity Act – Regulation B. and all other non-discrimination and non-profiling rulings.