May 26, 2015

FT, do you really think credit-risk-weighted capital requirements for banks do not cause lower productivity?

Sir, Sam Fleming and Chris Giles ask: “what can be done to restore the productivity levels needed to boost living standards…?” “The waiting game”, May 26.

But even though they point out “Investment is too low”, they do not even mention the effect that credit-risk-weighted capital (equity) requirements can have on that and on productivity.

The Basel Committee’ credit-risk-weight of governments is 0% while the weight of SMEs and entrepreneurs is 100%.

And that is something quite discussable, especially in these days when governments announce they need to use financial repression in order to impose informal haircuts on their obligations.

But that also translates de facto into the Basel Committee stating that the risk weight for bank credit not being used productively is 0% for government bureaucrats, and 100% for SMEs and entrepreneurs.

And only communists could think that has no negative effect on productivity.

Are you communists FT? If you’re not then it is high time you help me to ask regulators about the concept of productivity weighted capital requirements for banks? I mean something that gives our banks a more elevated societal purpose, than just being safe-mattresses, and housing or government financiers.

Have not our children and grandchildren waited enough for that?