Portugal might need everything to be perceived as risky, so as to stop the regulatory distortions of bank credit

Sir, Peter Wise mentions a “crucial ruling by Canadian rating agency DBRS next month on Portugal’s only investment-grade credit rating.” “IMF fears Portugal recovery is running out of steam” September 23. 

Again, with bank regulations that directly discriminate against the access to bank credit of SMEs and entrepreneurs, only on account of them being perceived as risky, as if those perceptions were not already considered by the banks, there is no way any other type of stimulus is going to be sustainable, and the economy not run out of steam.

If Portugal cannot free itself from these regulations, perhaps the best think that could happen to it is for everything to be downgraded and seen as equally risky.

That would at least allow for some more efficient allocation of bank credit to the real economy. That could give Portugal a chance to work itself out of that hole in which, as I see it, the Basel Committee on Banking supervision, with its senseless risk weighted capital requirements for banks, has helped to dig. 

How sad IMF refuses to understand how current bank regulations distort.

@PerKurowski ©