October 25, 2016

How can economies gain vitality when banks finance more basements for jobless kids to stay with parents, than SMEs?

The Basel Committee’s risk weighted capital requirements for banks set the risk weight for financing residential houses is 35%, while the risk weight for loan to unrated SMEs is 100%.

That clearly means regulators feel it is better for banks to finance the “safer” basements where jobless kids can live with their parents, than to finance the “risky” SMEs that could create jobs for the kids, so they too could afford to become parents.

And to top it up, since they assign a risk weight of 0% to the sovereigns, these statist regulators also believe that bureaucrats know better what to do with bank credit credits than the private sector. 

So Sir, I am truly aghast that with such regulatory lunacy well alive and kicking, you can still believe in what you opine in “The eurozone economy regains some vitality” October 25.

@PerKurowski ©