July 12, 2016

#BoE #FSB Mark Carney why do you bank regulators discriminate so much against us SMEs and entrepreneurs?

Sir, Mitul Patel with reference to that “The Bank of England’s Monetary Policy Committee will formally meet on Thursday for the first time since the EU referendum result” expresses many valid concerns. “Question marks remain as BoE grapples with monetary policy poser” July 12

But the following question is in my mind of much larger importance:

Mr. Mark Carney, you as the chair of the Financial Stability Board must be well versed on the subject of bank regulations, and so could you please explain to us SMEs and entrepreneurs the following?

We, who are usually perceived as risky, usually perceive much less bank credit and pay much higher risk premiums than those perceived as safe. And so, why do banks, when compared to the capital they need to hold against those perceived as safe, need to hold much more capital against loans to us.

Since banks can then leverage their equity, and the support they receive from taxpayers much more with assets perceived as safe, than with loans to us, we now have a much harder time to provide the banks with competitive risk adjusted ROEs. And so we get even less bank credit or have to pay even higher interest rates.

And to top it up we cannot understand where you all got the idea that banks could build up the excessive and dangerous exposures that could threaten the bank system, with small and high interest rate loans to borrowers like us.

So Sir, can you explain it all for us? Why should our access to bank credit be curtailed? Are we not useful to the real economy?


Will Mark Carney dare to take that question, or will he as I once heard Robert McNamara recommend: “If they make you a question you don’t like just answer the question you wanted to hear”?

@PerKurowski ©