February 06, 2017

Dear Sir, using your extraordinary savoir-faire and FT’s immense influence, please educate our bank regulators

(I will try it the Lucy Kellaway way “How to ask for what you want — and get it every time” February 6.)

Sir, the world needs for you and your astonishing influential paper, as always without fear and without favour, to inform bank regulators about that their current regulations is based on a fundamental mistake, a sort of the mother of all “alternative facts”; namely that what is AAA to AA rated, is much safer for the banking system than what is rated below BB-.

That, in their standardized risk weights, has caused them to assign a meager 20% risk weight to the very dangerous AAA-risktocracy and 150% to those made so innocuous by being perceived ex ante as very risky.

Most probably because I am so unimportant, I have not found a way to transmit to the regulators the real truth, namely that excessive exposures to what was perceived as risky when placed on banks’ balance sheets have never caused a major bank crisis. That dishonor belongs to unforeseen events (like devaluations), criminal behavior, and to what was ex ante perceived as very safe but that ex post turned out to be very risky.

But Sir, with your importance and extraordinary savoir faire I am sure you would be able to reach out to them, discreetly if you so wish.

When you do, the world will owe you immense gratitude because, as is, this mistake has created such distortions in the allocation of bank credit to the real economy that our banks are no longer financing the riskier future our children needs to be financed, but only refinancing the safer past and present.

If they are too hardheaded and you need some backup argument, you could always quote Voltaire to them “May God defend me from my friends, I can defend myself from my enemies

Yours always, admiringly and cordially

Per Kurowski