To prevent the next unpreventable financial crisis, let us at least try better and more accountable bank regulators.

Sir, Axel Weber a co-author of the Group of Thirty report writes: “Following the global financial crisis, we have significantly improved the resilience of the financial system, strengthened the capital and liquidity positions of banks and increased our ability to deal with failing lenders.” “Preventive measures will not stop the next financial crisis” September 18.

I have been arguing, for more than a decade, that what primarily caused the crisis, were the distortions in the allocation of credit produced by the risk weighted capital requirements. AS that distortion has not been eliminated, and given that generally higher capital requirements might on the margins even intensify those distortions, not enough has been done to improve the resilience of the financial system; nor that of the real economy on which so much the real long term financial stability really depends on.

So, to prevent the next crisis we must prevent having regulators who believe that what’s perceived as risky is more dangerous to our bank system than what’s perceived as safe. 

There’s no reference at all to that distortion in the Group of Thirty report that Mr Weber helped to author, though that should perhaps not surprise us. Looking at the members of that mutual admiration club, one could suspect that all have a vested interest in keeping that distortion as one that shall not be named. 

In an Op-ed of 1998 I wrote: “In many cases even trying to regulate banks runs the risk of giving the impression that by means of strict regulations, the risks have disappeared. Sometimes it is good faith... sometimes it is only pure faith… History is full of examples of where the State, by meddling to avoid damages, caused infinite larger damages”

But in that Op-ed I also wrote, “I do not propose, not for a moment, that the State abandons completely the regulatory functions, much the opposite, what I propose is that it assumes it correctly”

Sir, the State assuming correctly its regulatory functions must, sine qua non, include holding the regulators accountable for their mistakes, not promoting them, and much less allowing them to keep on regulating, covering up their own mistakes.

By the way, when is FT going to stop having such a prominent role in that cover-up?

@PerKurowski