So where were those regulators who knew that “banks had wafer-thin capital levels and were accidents waiting to happen”? In some La-La Land!

Sir, Hans Hoogervorst, the chair of the International Accounting Standards Board, while discussing new accounting standard, IFRS 9, writes:“The truth is that HBOS met bank regulators’ capital requirements, and its financial statements clearly showed that its balance sheet was supported by no more than 3.3 per cent of equity. For investors who cared to look, the IFRS standards did a quite decent job of making crystal clear that many banks had wafer-thin capital levels and were accidents waiting to happen”, “Do not blame accounting rules for the financial crisis”, October 4.

Hoogervorst adds, “with markets swimming in debt and overpriced assets… we need management to own up to the facts — and auditors, regulators and investors to be vigilant.”

So where were the regulators who knew that “banks had wafer-thin capital levels and were accidents waiting to happen”? Clearly not where they should have been! Because regulators who, with Basel II in 2004, felt it was ok to allow a bank to leverage a mindboggling 62.5 times only because a human fallible credit rating agency awarded an asset an AAA to AA rating, must clearly have be away sleeping in some La-La-Land.

And since the regulators still do not understand how their risk weighted capital requirements for banks distorts the allocation of bank credit; first by pushing for especially large exposures against especially little capital to what can be especially dangerous to our bank system, because it is perceived as safe; and then by hindering that risk-taking, like when financing “risky” entrepreneurs, that the economy needs to keep on growing sustainable, which, at the end of the day, is what most matters to keep our bank system safe… they are still in La-La-Land or shamefully still sleeping on the job, or, even more shamefully, doing all they can to cover up their mistake, even if that means causing a new and even worse crisis.

But where was FT during these ten years? You tell me Sir; as for me I at least wrote you and your experts a couple of thousand letters on the issue. You can find these on my blog TeaWithFT searching the label “subprime banking regulations”

@PerKurowski