October 08, 2014

There are two kinds of risk appetites. One is dangerously abundant, and the other is dangerously scarce.

Sir. fastFT writes: “Improving US is not enough to reignite risk appetite” October 8. I think it is quite necessary to clarify what kind of risk appetite they refer to.

There is already a dangerous voracious risk appetite for what is perceived ex ante as “absolutely safe”, like exposures to “infallible sovereigns”. That is in large part the direct consequence of banks being allowed to hold much less capital (equity) against that type of exposures than against what is perceived “risky”. And that is of course not the kind of risk appetite we need.

The risk appetite we surely need to improve, can only result from eliminating regulatory discrimination against the fair access to bank credit of “the risky”, namely the medium and small businesses, entrepreneurs and start ups.