September 07, 2016
Sir, Robert Jenkins writes “Prioritizing competitiveness is precisely what led to lax regulation”, “A little longer on the naughty step will benefit banks” September 7.
While prioritizing competitiveness between banks, trying to make these follow similar rules all over the world, regulators introduced the risk weighted capital requirements for banks.
That piece of regulation impeded those borrowers perceived as risky, like SMEs and entrepreneurs to compete fairly for access to bank credit, and therefore decreed inequality and economic stagnation.
That piece of regulation, by motivating banks to build up dangerous excessive exposures to what was perceived, decreed or concocted as safe, like AAA rated securities, financing of houses and loans to sovereigns (like Greece), caused the 2007/08 crisis.
Robert Jenkins, as former member of the Bank of England’s Financial Policy Committee should, together with all his bank regulation buddies, as an absolute minimum, should be placed on the naughty step.
Personally I would prefer them having to parade down some major avenues wearing dunce caps and forever be barred from having anything to do with any type of regulations… I mean how dumb can you be to believe that what is perceived as risky is riskier for the banks than what is perceived as safe.
Info: Basel’ private sector risk weights: for AAA rated = 20% and for below BB- 150%