Risk of cyber-attack weighted equity requirements for banks make much more sense than the credit-risk weighted
Sir, I refer to Gillian Tett’s “Will cyber attacks mean the light go out?” April 25.
In it Tett describes the possibility of some huge unexpected losses that could happen to banks or to borrowers. And unexpected losses is precisely against which for instance banks, should be required to hold equity.
Instead our current regulators in the Basel Committee require banks to hold equity against the expected losses reflected in the perceived credit risks. As if the unexpected would be a function of the expected? Now how dumb is not that?
But perhaps there is a relation, though not the one the regulators see. The truth is that the safer something seems, the worse could be the consequences of something unexpected.
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