February 23, 2018

Where are the occupational licensing requirements when they are really needed, like in bank regulations?

Sir, Simon Samuels writes: “A manufacturing company would not be expected to operate without knowing its cost of production. Not knowing how much capital is needed to lend money is the banking equivalent” “Confusion over bank capital requirements fails us all” February 23.

So there is a banking consultant at Veritum Partners, clearly stating (confessing) that the production cost of credit depends on the capital requirement. Of course, less capital equals lower credit production cost, higher capital higher production cost.

And so again I ask, for the umpteenth time, why on earth should regulators, with their risk weighted capital requirements favor those ex ante perceived as safe with lower cost produced credit, than those ex ante perceived as risky? Do they not understand that dangerously distorts the allocation of bank credit? Do they not know that guarantees, sooner or later dangerously overpopulating a safe haven… against especially little capital?

I have recently read that in forty-one US states license for makeup artists is required and in thirteen states you need a license to be a bartender. So tell me, when are the occupational licensing requirements when we really need them, like for that extremely delicate function of regulating banks? The lack of it has saddled us with regulators who believe that what’s perceived as risky is more dangerous to our bank system that what’s perceived, decreed or concocted as safe! Unbelievable eh?