October 30, 2017

If I were a bank regulator, I would set the lowest capital requirements against the loans to young entrepreneurs

Sir, Leo Lewis writes Tatsuo Yasunaga, the Mitsui & Co chief believes that “The innovation of which he is most proud is a support system that encourages staff to create business start-ups within the company. Twenty proposals have been received in the first year. ‘It encourages our young guys to . . . run the business themselves… I’d like to encourage them to enjoy business’”, “Japan’s champion of young entrepreneurs” October 30.

Do I agree? If I were a bank regulator I would make sure banks would be able to earn their highest risk adjusted returns on equity, when lending to the young on which we all depend. What they now do fixing the capital requirements with risk weighs of 0% on sovereigns, 20% on AAA rated, 35% on purchase of houses and 100% on unrated entrepreneurs, is exactly the opposite.

PS. Major bank crises never ever result from excessive exposures to "risky" young entrepreneurs.