Stupidly distorting bank regulations are inhibiting lending to small and medium sized businesses

Sir, Lawrence Summers writes: “regulatory pressure is inhibiting lending to small and medium sized businesses.” “Central bankers do not have as many tools as they think” December 7.

In other words he is referring to that the stimulus of QEs and ultra low interest rates is not reaching fundamental economic agents, such as small and medium sized businesses. I wonder is this not a major issue?

As I have been writing for over a decade (and more than 2.000 letters to FT) current credit risk weighted capital requirements for banks utterly distort the allocation of bank credit to the real economy.

In November 2004, in a letter published by FT I wrote: “our bank supervisors in Basel are unwittingly controlling the capital flows in the world. We also wonder in how many Basel propositions it will take before they start realizing the damage they are doing by favoring so much bank lending to the public sector. In some developing countries, access to credit for the private sector is all but gone, and the banks are up to the hilt in public credits.”

When are supposed experts on bank regulations face up to the fact that supposed experts on bank regulations do not know what they are doing… among others because they have so shamefully neglected to even define the purpose of our banks before regulating these.

@PerKurowski ©