February 07, 2017
Sir, Claire Jones quotes Mari Draghi with: “The last thing we need is a relaxation of regulation… The idea of repeating the conditions of before the crisis is very worrisome.” “Draghi pushes back against protectionist programme” February 7.
As the former Chairman of the Financial Stability Board, and as the current Chairman of the Group of Governors and Heads of Supervision to which the Basel Committee for Banking Supervision reports, Mario Draghi is as responsible for bank regulations as anyone can be.
And so this is a man who clearly believes that what is rated AAA to AA represents such little risk for the banking system that it merits a risk weight of only 20%, while what is rated below BB- is so dangerous that it must be risk weighted 150%. That is of course sheer lunacy.
And so this is a man who clearly believes that a sovereign can have a risk weight of 0%, while the citizens who give the sovereign its strength must be risk weighted 100%. That is of course run-away statism.
And that’s why we got hit with the AAA rated securities backed with mortgages to the subprime sector in the USA and Greece with way too much sovereign debt.
Sir, now I dare you to read the latest document issued by the Basel Committee, titled “Frequently asked questions on market risk capital requirements” and then dare, without fear and without favor, answer me this very straightforward question, with a Yes or a No. Do you think the Basel Committee is digging us out, or digging us further down, in the regulatory hole they have placed us in?
Sir, in my mind it is perfectly clear in that Mario Draghi has no moral authority whatsoever, to lecture anyone about manipulation or protectionism.
The risk weighted capital requirements for banks is an outright manipulation of the access to bank credit that discriminates against the risky, like SMEs and entrepreneurs, and protects the interests of the banks and of those perceived, decreed or concocted as safe.