The Basel Committee’s instructions: Banks, ignore poverty, jobs, sustainability and inequality and just focus on credit risk

Sir, Andrew McAfee, gives us his take on the tragedy that “Lots of the traditional jobs for these people are disappearing in the rich world, and wages for remaining workers are pretty stagnant… and the middle class is being hollowed out in country after country” “Boredom and vice can be deadly in a life without work” November 6

And I hold that is in much the result of bank regulators giving an overriding importance to banks avoiding credit risk and not caring one iota about any other purpose of our banks.

And Sir, by silencing me, you fully support those absolutely inept regulators. The truth will catch up on you… on the web I have already over 2.000 letters to you on that subject and which you have ignored, because you so mono-thematically cannot accept the idea of technocrats having been so mistaken.

Not long ago, one of your famous columnist replied to one of my letters with the following:

“IT IS NOT TRUE that risk-weighting is the only reason for the crisis… To argue that it is implies, as I have told you, that allowing banks to make certain loans compels them to do so. But there is no such coercion: if the risks are high, they should not, in their own interest, make the loans. Nor is it the case that risk-weighting prevented banks from lending to small enterprises. The reason that they did not (and do not) do so is that it IS ACTUALLY risky to do so, relative to the perceived return.”

You see, evidently your columnist does not understand that if you can leverage your risk adjusted return much more when lending to the safe, and thereby obtain a much higher relative risk adjusted return on equity when lending to the safe, you will simply not lend to the risky, like to the SMEs and entrepreneurs.

Or let's put it this way. Two borrowers with exactly the same risk profile. To one the bank is allowed to lend leveraging 12 to 1, to the other 30 to 1. Who do you think the bank is going to lend to the most and the cheapest?

Or let's put it this way. Two borrowers with different risk profiles, but offering the same risk and cost adjusted margins. To one the bank is allowed to lend leveraging 12 to 1, to the other 30 to 1. Who do you think the bank is going to lend to the most and the cheapest?

Sir, do you want me to arrange a Finance 101 for your columnists and reporters?

PS. I was thinking a lot of that boredom and vice that McAfee refers to when I wrote "We need worthy and decent unemployments" 

@PerKurowski ©