September 29, 2014
September 27, 2014
Basel regulations infected banks with a risk-taking deficiency virus, which is mortal to the economy
Sir, Tim Harford in reference to recent food regulations in France writes: “Insisting on home made food ensures neither quality nor Frenchness”, “When regulators are all out to dèjenuer” September 27.
And Harford sort of hints at the possibility that regulatory meddling could spell the end to French cooking and, because better influencing taste buds might be roaming freer in Britain, we might end up with a British cuisine. That would clearly be a tragedy for France, but perhaps also for Britain, which I have often felt derives some national pride from its bad cooking.
Harford also reminds us of “International rules of financial stability did not give us financial stability. Just because a problem exists does not mean that a new regulation will solve it”.
Indeed, the risk-weighted capital requirements imposed on banks, and that very clearly signaled that banks should only lend to the safe and not lend to the risky, ensures neither safe banks nor sturdy economies. The first guarantees excessive exposures, backed with very little capital, to what ex ante is perceived as safe but could ex post be very risky; the second, much too little bank exposures to those our economies might most need our banks to be financing, like our “risky” SME’s and entrepreneurs.
Sir, it amazes me how difficult it is for most financial and economy “experts”, which includes you, and Harford, to understand the fact that current Basel regulations have infected our banks with a risk-taking deficiency virus which is mortal for our economies.
PS. I am not sure about the title of Tim Harford's article as it seems not to be a bad idea that all regulators left their jobs and went out to dèjenuer, and left us alone.
September 26, 2014
September 24, 2014
It is better to have capital requirements for banks based on clean growth and jobs than on credit risks.
September 23, 2014
September 22, 2014
September 20, 2014
Should an 81 years old Scot, have had more right to vote on Scotland independency than a newborn Scot?
September 19, 2014
Never allow anything to be classified as unexpected or unintended consequences, unless proven beyond doubts to be such.
Investors driven out of safe investments by bank regulations and QEs, are they yield-hungry or just yield-starved?
What if instead of credit risks we used credit usefulness when weighing capital requirements for banks?
We care too much about financing houses when compared with financing the jobs needed to the pay the mortgages and the utilities.
September 18, 2014
September 17, 2014
What I said to those around me was “Never ever would Winston Churchill (or Putin) have allowed to be photographed in a little row boat, on a small lake, close to the shore, wearing a life vest!”
September 15, 2014
The Financial Times “a better newspaper for the modern age” ignored the financial story of the century.
Europe, why should chief executives of businesses with cash on hand take risks when banks are officially paid not to?
Europe, the safety of your banks, though important, is only a subset of the safety of your real economy.
September 13, 2014
On allocating resources, why does the undercover economist care more about donations than bank credit?
September 12, 2014
September 11, 2014
Mario Draghi… you are personally responsible for any ECB liquidity injections in Europe being just wasted away.
September 10, 2014
Neither Martin Wolf’s nor Mario Draghi’s ”whatever it takes” includes what is most urgent for Europe
PS.Basel II and III risk weighted capital requirements are a regulatory nightmare.