September 28, 2016
Sir, I refer to Sarah O’Connor’s “Want your staff to do more? Just listen to them”, September 28.
Let us suppose you are sitting around a table with all your employees, to hear their suggestions of how to improve productivity. And you also have in front of you their respective CV’s.
And now let us also suppose your boss tells you: “If you find a good idea presented by those having a Master degree or more, I will triple your salary but, if you find that idea among those with less qualifications, you will only get a 10 percent raise.” What will happen?
I ask this because, in terms of bank credits that could lead to more productivity, that is precisely what bank regulators, with their risk weighted capital requirements for banks, are telling the bankers. “If the good idea comes from one AAA rated, you will be allowed to leverage a loan to him much more, meaning you could earn a much higher expected risk-adjusted return on equity, than if that good idea came from an SME or an unrated citizen.