Much of those interest margins banks now obtain financing what’s perceived safe, used to belong to pension funds.

Sir, I refer to Mary Childs and John Authers’ “Canada quietly treads radical path on pensions: Retirement funds are pushing beyond bonds and stocks in search of better returns” August 23.

Please hear me out. Before the introduction of the risk weighted capital requirements, banks spread out their credits to those who offered them the best risk-adjusted margins, while subjecting the size of the exposures to the same perceived credit risk. Taking risks, with reasoned audacity, was the business of the banks. In comparison, avoiding risks, and looking for certain minimum returns, was the business of pension funds.

But, with the risk weighted capital requirements that allow banks to leverage much more their equity with what is perceived as safe than with what is perceived as risky, banks began maximizing their returns on equity by minimizing the equity they needed to hold, something which meant going for what was perceived, decreed or concocted as safe.

As a result the bankers were able to realize their wet dreams of huge perceived risk adjusted returns on equity for playing it safe.

But that de facto meant that banks occupied the investment space pension funds use to occupy, and so now we have that pension funds have to go out there and take the risks banks used to take.

Sir, you can be damn sure that if banks needed to hold the same capital against all assets they would not be swamping the safe havens, and pension funds would not have to be “facing the challenge of [so] low returns on traditional assets”

This is all so foolish. Why can’t we allow banks to be banks and pension funds to be pension funds?

This is all so dangerous. If banks do not finance risky SMEs and entrepreneurs the real economy will stall and fall, and then even the safest will not buy retirement tranquility (or jobs for our children and grandchildren).