October 31, 2017

Beware, data, even when in data trusts, can be exploited in very dangerous dumb ways.

Sir, John Thornhill writes: “A country’s ability to exploit data in safe and creative ways will increasingly determine its success. It is high time for institutional innovation to encourage the process...” “Data trusts can stimulate the digital economy” October 30

Indeed but if data is exploited erroneously that can also cause great tragedies.

For example, even though there must exist loads of data on what caused bank failures, the regulators used data about the failures of the borrowers; something which of course c'est pas la même chose.

That explains how they could risk-weigh that rated so safe as AAA, and which could therefore create excessive exposures that could endanger bank systems, with only 20%, while that rated so risky as below BB-, and which bankers do not like to touch with a ten feet pole got 150%.

As a result we got a crisis because banks held too many securities rated AAA and too high exposures to what was also assigned very low risk-weights like sovereigns, like Greece.

As a result millions of not rated SMEs and entrepreneurs, and who were risks weighted 100%, have had their credit applications denied, as banks cannot leverage their equity as much as with other alternatives.

Sir, I suspect that “The EU’s sweeping General Data Protection Regulation, which comes into force in May and will be adopted by Britain also [though it] imposes strict restrictions on data use, will probably not contain any language with respect to dumb data use.