#AI ChatGPT - OpenAI: A question on behalf of FT and Martin Wolf.

 In "Britain needs a growth strategy" Martin Wolf mentions the UK has for too long settled for managing stagnation.

On behalf of FT and Martin Wolf I decided to ask ChatGPT:

"Could bank capital requirements that favors “safe” government debt and residential mortgages over “risky” loans to small businesses and entrepreneurs, doom a nation to stagnation?"

ChatGPT answered:

"The impact of bank capital requirements on economic growth is a complex and debated topic among economists. Capital requirements are regulations set by financial authorities that determine the amount of capital a bank must hold in relation to its assets. These requirements are designed to ensure the stability of the financial system by reducing the risk of bank failures.

If capital requirements heavily favor "safe" assets such as government debt and residential mortgages over "risky" loans to small businesses and entrepreneurs, it can potentially have both positive and negative effects on the economy.

Potential Positive Effects:

Financial Stability: By incentivizing banks to invest in safer assets, capital requirements can contribute to financial stability. This reduces the likelihood of bank failures, which could have broader systemic consequences.

Investor Confidence: Investors and depositors may feel more secure knowing that banks are holding assets that are considered safer, leading to increased confidence in the financial system.

Potential Negative Effects:

Stifling Innovation and Growth: If banks are discouraged from lending to small businesses and entrepreneurs, it could hinder innovation and economic growth. Small and medium-sized enterprises (SMEs) are often drivers of job creation and economic dynamism.

Inequality: Focusing on "safe" assets may exacerbate economic inequality. Small businesses, startups, and entrepreneurs, which are crucial for innovation and job creation, might face difficulty accessing the necessary funding.

Reduced Economic Diversity: A banking system overly concentrated on certain types of assets may lead to reduced economic diversity. This can make the economy more vulnerable to shocks in specific sectors.

Long-Term Stagnation: Overemphasis on "safe" assets might lead to a lack of risk-taking and investment in new ventures, potentially resulting in long-term economic stagnation.

Balancing Act:

It's crucial for financial regulators to strike a balance between stability and promoting economic growth. Prudent capital requirements that consider the riskiness of assets, while still allowing banks to support economic development, can be important. Striking the right balance often involves ongoing adjustments to regulations based on economic conditions and lessons learned from past experiences.

In conclusion, while capital requirements that favor "safe" assets can contribute to financial stability, an excessive focus on them at the expense of riskier but potentially innovative investments could indeed have negative consequences for a nation's economic dynamism and growth. The challenge lies in finding a regulatory framework that mitigates risk without stifling entrepreneurial activity and economic progress."

Thanks!

ChatGPT answered: You're welcome! If you have any more questions or if there's anything else I can help you with, feel free to ask. Happy to assist!

Note: The answers are copied exactly from those given to me by OpenAI

Here my many other questions to ChatGPT – OpenAI on bank regulations

Comment: Way back, 2009, Martin Wolf was kind to publish in his Economic Forum an articled I titled "Please free us from imprudent risk aversion and give us some prudent risk-taking." I stand by it more than ever.

Any winner in a second Brexit referendum should want to make sure his would not be a Pyrrhic victory.

Sir, Simon Kuper writes: “Only voting Remain will end the stress and tedium (the national divide will remain whoever wins)”, “How Remain can win a second referendum” April 20.

Of course the national divide will remain, but the question is whether it will remain the same whoever wins the second referendum? Could the divide not increase? Who could, if winning, be more capable to set a course towards national unity, Brexiters or Remainers?

Kuper opines, “Remain needs to sound as patriotic as Leave. It must present the UK as a European power, not a sorry victim of Europe.”

Yes, of course, but have the Remainer done so? I don’t think so.

A powerful Remainer would have imposed conditions on Europe that would make it easier to convert Brexiters. Of that nothing has been seen. (A powerful Brexiteer would have looked for the same in order to convert Remainers).

A powerful Remainer might have started out for instance by questioning Michel Barnier as the European negotiator, as there were indications of him having conflicts of interest. (A powerful Brexiteer should have had to do so too).

A powerful Remainer would have asked Europe for a clear answer on how they intend to solve the problem with having assigned a 0% risk weight to all Eurozone sovereign that take on debt in a currency that de facto is not their own domestic (printable) one. I mean a powerful Remainer would not risk standing their with egg on his face having won the second referendum and then having nothing to remain in. (A powerful Brexiteer might not really have had to do so).

Kuper also opines “In a second referendum, Remainers can borrow the anti-elitist language of Leave to inveigh against privileged Brexiters.” 

Yes, that could help the Remainers to win the referendum, but that would also increase the chances of the divisions growing and they having won a Pyrrhic victory.

Sir, at the end of the day Britain’s problem is that the Brexit vs. Remain debate was taken over way too much by those wanting to profit on it by it turning it into a battle between good and evil. If you do not possess a sufficient strong elite capable of stopping such nonsense, you will pay the consequences, 

Sir, when thinking about what second referendum result would have the best possibilities over to regain some workable unit, each day that passes, makes me feel closer to have to give, a quite reluctant, “Brexit” response to that.

PS. London’s West End needs urgently an Oklahoma revival adapted to Britain. “The Brexiters and Remainers should be friends”

@PerKurowski

Instead of working on a Brexit, Britain should do all Europeans a favor and negotiate a very tough EU Remainer

Sir, Simon Kuper, in a back and forth discussion on Brexit, ends upcontemplating “a soft Brexit or Brino, in which Britain becomes a poorer Norway, accepting all European rules including freedom of movement to keep trade and travel flowing.” “Why there won’t be a no-deal Brexit” October 4.

As a reason for that Kuper opines “Few European officials want the UK back now, anyway”. Indeed I can understand that EU’s Brussels bureaucrats feeling rejected and questioned want to spank the Brits for Brexit, but do Europeans want that too? I don’t think so.

Sir, as I see it, and as I have been writing to you for some time, the best way out is a tough Remainder offer in which Britain lays clear what it wants the EU to do, in order to want to remain a member of it.

I am not a Brit, and I do not live in Europe, but my list of request would include:

1. EU needs to solve the challenges that the euro poses to it and about which they have done little to nothing in the twenty years since its inception. If they do not do that, the EU has no future. And don’t let them tell you those challenges were not known.

2. EU must make sure never again treat one of its members like it treated Greece, which for the risk weighted capital requirement it assigned a risk weight of 0%, and thereby doomed it to tragic excessive indebtedness, only to later put the whole blame, and costs of that, mistake on Greece.

3. Understand that Europe has no future with risk adverse risk weighted capital requirements for banks that distort the allocation of credit to the real economy, and sets it up to a financial crisis of monstrous proportions, by means of incentivizing dangerous excessive bank exposures to something considered especially safe, against especially little capital. 

4. That EU stops behaving like a Banana Union getting involved into such issues as regulating the entry fees to Romanian monasteries.

Sir, if those requests would come to fruition, many Europeans would be immensely thankful to Britain… again.

@PerKurowski

In preparation for a Brexit disaster, should Brits go down to Venezuela?

Sir, Tim Harford nervously, anxiously, writes, “Most likely, Britain will emerge from Brexit negotiations scratched and bruised but largely intact, proudly declaring that the ordeal was a brilliant shortcut, then fumbling for a map and compass. But, while that is the most plausible result, the risk of a total train wreck remains”, “Deal or no deal, the costs are clear and present” September 8.

“Imagine you are organising a wedding for — say — March 29 2019…[and] your chosen caterer, you love this caterer’s food, prices, and service, boldly declares that it may be unable to supply the food” 

Oh what a horror! Perhaps in preparation for such travails Harford and other Brits should take a trip down to Venezuela to learn how to do without food or medicines.

Or, does not a real Brexit disaster contain the potential of constituting a tremendous opportunity to nurture a national sense of solidarity and purpose… like the Blitz during World War II did?

Like if post-Brexit customs process take much longer, could that not create more jobs for humans or sparkle automation initiatives a la Amazon that could bring much higher productivity down the line.

Of course a hard landing Brexit could create many problems, but I am quite confident that the Britain I know, or at least the one I knew, would be perfectly capable to handle the challenges. And, if not, then sincerely Brexit is, by far, not Britain’s biggest problem.

Sir, and looking cross the channel, I would much prefer having to confront a bundle of Brexit problems, than having to create the too much delayed responses to the challenges posed by the euro so as to stop it from breaking up the European Union.

@PerKurowski

If with Brexit Britain can break lose from Basel’s bank regulations, then it could come up on top of EU

Sir, Martin Wolf writes: “The recently leaked UK government analysis concludes that with Brexit, under a Canada-style deal, UK gross domestic product might be 5 percentage points lower than it would otherwise be, after 15 years — a loss of about a fifth of the potential increase in output by that time”, “Britain’s road to becoming the EU’s Canada”, February 21.

Has someone in the UK government analyzed what long term impact on UK’s gross domestic product the risk weighted capital requirements for banks have? I mean because since this regulation gives banks great incentives for staying away from financing the riskier future and just keep to re-financing the safer present, that most be causing some serious costs for the future.

Again, any bank regulations that is so stupidly based on the assumption that the ex ante perceived risks reflects adequately the ex post danger to the bank system, has to turn out incredibly costly.

So, if Brexit allows Britain the opportunity to break lose from these regulations, and Britain capitalizes it, while EU stay hooked on it, then Britain could come up over EU, and many in Europe would want to Baselexit too.

Why, when the world is going through so many not entirely understood changes, should Britain limit itself to cry over what it can lose with Brexit, while giving so little consideration to what it has to win, with our without EU?

PS. My 2019 letter to the Financial Stability Board
PS. My 2019 letter to the IMF

@PerKurowski

While Brexit is only in the Limbo circle, Martin Wolf seems already convinced that all ye who entered there should shed all illusion and abandon all hope.

Sir, again Martin Wolf writes as if being convinced there’s no life, at least no good life for Britain, after Brexit. “Britain has more illusions to shed on Brexit” December 15.

Why? Of course Brexit is challenging, but not only for Britain. I have always thought of Britain as glue that helps holds the European Union together, so I am sure Brexit must be very challenging to EU too.

What should be done? I would just go for it! Massive government tweeting: “Brexit is not about Britain not wanting to have anything to do with Europe. It has all to do with Britain not being comfortable with the decisions of the EU technocracy.”

And then tweet: If Britain is willing to pay such a large fine for being able to get out of the EU club, should you, as members of that same club not be concerned with that?

And incite the Europeans to take the Brexit opportunity for together with Britain redefining a better Europe.

Sir, I argue this as I am convinced that if you’ve already mentally surrendered, and think you must accept any conditions offered by a Neo-Versailles treaty, then you are really lost. And for many reasons I do not like that to happen to Britain.

Or as Violet Crawley would say, don't be so defeatist, it’s so middle class. 

Okay, I might have gone bonkers on this (too), but let me assure you that Martin Wolf is no Winston Churchill either.

PS. Freshening up on Dante’s “Inferno” I read that some sinners endure lesser torments than do “those consigned for committing acts of violence and fraud”. The latter, according to Dorothy L. Sayers’ translation, were guilty of "abuse of the specifically human faculty of reason". Oops, could that include bank regulators who require banks to hold more capital against what is perceived risky, when in fact it is when something perceived safe ends up being risky, that we all most need our banks to hold that?

Sorry, just asking, I have no intention of wanting to send for instance Mario Draghi to hell. Parading him down our main avenues wearing a dunce cap would suffice.

@PerKurowski

With risk-weighted bank capital requirements promoting risk aversion, Britain will go nowhere, with or without Brexit

Sir, Martin Wolf writes: “UK’s average productivity is at best mediocre and its productivity growth post-crisis is in the basement, down there with Italy’s. Investment is weak and relative export performance consistently dismal. Contrast Germany.” “Zombie ideas about Brexit that refuse to die” October 21

So, when he then argues “It will be impossible to offset the loss of favourable access to EU markets, which now take some 40 per cent of the UK’s exports” a natural question is, would not those losses seem to happen anyhow, with or without Brexit?

Could it in fact be that “favourable access” has dangerously hidden other profound problems?

I would never have voted for Brexit, but that might only be because I do not know Britain well. Had I for instance thought that it was becoming more and more dependent, on a not so dependable EU, I might have voted otherwise. Because frankly, EU is in great need of some real shaking up too, in order not to fall into the hands of those populists both Martin Wolf and I so profoundly fear.

Of course Wolf is right when he says “In a liberal democracy, we are all entitled to our opinions and to seek to overturn what we consider grossly mistaken decisions.” But Sir, should that not require something more than just being against “saboteurs with zombie ideas”?

Should that not include proposals about what Britain could do in order not to have given the Brexit vote a chance? And, who knows, those changes could be just as important or even more important than staying in the EU.

Clearly taking on debt to propel consumption, plus building a lot of infrastructure caring not sufficiently about the fact that we might not know enough about what infrastructure could be needed twenty years from now, sounds like a very comfortable plan for the short term. But, is it enough for Britain’s grandchildren or their children?

Personally, as Wolf very well knows, I would put the elimination of bank regulations that dangerously distort the allocation of bank credit to the real economy, very high on that list of proposals.

The first banks to do that have the best chance of becoming the strongest banks in the future. Is it not high time for Britain’s banker to return to being savvy loan officers, instead of the silly bank capital (equity) minimizers they have now become?

PS. Frankly the idea you can identify all risks, and stop these from happening, without unexpected consequences, seems to me one of the mother of all zombie ideas of our times.

@PerKurowski

Britain, don’t let all your hard and well-earned goodwill in Europe go to waste with dumb Brexit negotiations

Sir, Josef Joffe describes well the kind of goodwill Britain has in Europe. That goodwill is being horribly wasted in the Brexit proceedings, among other by those Remainders that want to get Brexit failures, in order to argue their petty “I told you so” “Brexit Britain has displaced Germany as the land of dreamers” August 16.

Had I been a citizen of Britain wanting decent Brexit negotiations, or one wanting to remain in EU, I would have reached out to all the millions of Josef Josses in Europe with the message of: “The Brexit vote indicates not all is well in EU, what can we do, and how can you help us to convince our fellow country men of not leaving?”

And if that had not opened up new roads, then my minimum minimorum plea would be: “Europeans, make sure your relations with Britain are mot harmed more than necessary by means of leaving Brexit negotiations, unsupervised, in the hands of EU-technocrats who have suffered a love spat or want to show off as though macho negotiators.

@PerKurowski

Should not Mr. Michel Barnier, The Negotiator, ask EU’s citizens how they want Britain to be treated during its Brexit?

Sir, I refer to Alex Barker’s report on “a tough speech on future relations” in which Michel Barnier opined that “the consequences of leaving the union had not been “fully understood across the Channel” and that Britain has yet to “face the facts” on the negative consequences of Brexit “EU top negotiator warns Britain to ‘face the facts’ on Brexit” July 7.

And I ask the question posed in the title because, for instance when in 2013 acting as the European Union Commissioner for Internal Market and Services, and wanting to impose his bank regulatory wills on the US, I perceived him like wanting to play a tough guy, “barnstorming the U.S.”, and this can have unexpected and unwelcomed consequences for both sides of the Channel.

What would Barnier do if on a scale of 1 to ten, from gentle to firm, the Europeans voted to treat Britain with a 2? Would he be capable to deliver?

Sir, again, I also detect a clear masochistic strain in all those Remainers who seem to want Britain to be severely mistreated, just in order to tell the Brexiters “See, we told you so!”

Britain, you should not sell yourself short. You have many many friends over the channel and who want to remain close friends. 

@PerKurowski

Trump might have done Europeans a huge favor by reminding them they have to fight for their own future themselves

Sir, today, May 29, is Memorial Day in the US. That is the day I walk down to the World War II Memorial in Washington, to try to thank those Americans who rescued my polish father from the concentration camp of Buchenwald more than 70 years ago. Had they not done that, I would not be, it is as simple as that.

But today I read Patrick McGee’s and George Parker’s “Europe can no longer rely on US partnership, warns Merkel” all the result of “a new transatlantic rift that has emerged after two days of international summits with President Donald Trump last week.” 

Is that true? No! Even when the partnership in World War II depended on very few, in my mind on Roosevelt and Churchill, any long-term partnership of this nature cannot really depend on what temporary leaders opine. If it did, it never existed.

There are of course general concerns. Like should I ask the Americans in the Mall to forgive Europeans for not showing the same interest in carrying their fair share of the defense load? Like, in these times of outsourcing, are the European and American manufacturing sectors able to respond somewhat similar than America did when it built up what Roosevelt called the Arsenal of Democracy, and that without it would have given the war a totally different outcome? Like, in these times of drones doing more and more of the fighting, are our soldiers capable to keep sufficiently of that fighting spirit that at the end of the day will be needed? And there is more… like the huge public debt loads and other minutia.

Sir, and if Chancellor Angela Merkel is sort of indirectly excluding the UK from the European defense, does that mean perhaps Britain should begin thinking about the need of promoting some English Language Empire as a substitute?

I do agree though 100% with Ms Merkel when she says: “We have to fight for our own future ourselves.” That is always the case, no matter what partnership or alliance you find yourself in. Merkel should reflect on the irony that Trump might have done her and all Europeans a great favor of reminding them of that simple fact of life.

@PerKurowski

No Martin Wolf! You do not get good results, for all, with Brexit negotiations, arguing that the UK holds a weak hand.

Sir, Martin Wolf, with respect to Brexit negotiations writes: “Theresa May should have realised, above all, that she holds a weak hand: the costs of no deal would be far bigger for the UK than the EU.” “Britain has the chance to secure a smooth Brexit transition” May 5.

What? Weak hand? EU has more to lose from Brexit than UK. EU gets stuck with the Euro, and so many other unresolved differences, languages included, without having Britain as a calming unofficial arbitrator. How many EU countries does Wolf think that will be glad seeing UK leave, and would settle with a high indemnity payment?

That is the only starting point that can lead to a continuous amicable and useful for all Britain and EU relation.

The more all European citizens send that message to those dummkopfs in Brussels who want to play macho men, in order to get back at those who showed so much disdain for them that they wanted to leave, the better for all in Europe.

The local European governments should be especially alert and not allow some few technocrats in Brussels to decide their future relations with Britain. It is they who will pay the costs.

Everyone might be helped by an ad campaign along the lines of: "EU, Brussels’s technocrats share blame for Brexit. If you Europeans want an amiable separation, help keep them in check"

Britain, of course, do not let these arguments I make go to your head either. It’s all a quid pro quo.

@PerKurowski

Should Brexit be negotiated between some Brussels divorce lawyers blithely ignoring what the divorcees might want?

Sir, I refer to the so many Brexit withdrawal anxieties expressed, in this case to Martin Wolf’s “Brexiters must lose if Brexit is to succeed” March 29.

I ask: Could EU technocrats negotiate Brexit ignoring the will of EU citizens as to what Brexit should mean? In many ways it seems to me like some Brussels attorneys will be discussing the divorce papers without even consulting the divorcing parties.

I believe in EU, but I also believe EU is in serious troubles (not the least because of those bank regulations that doom its economies to stall and fall).

So, in the same vein that much is spoken about what Brexit implies for Britain, too little really has been discussed on what Brexit really means to EU.

Here Wolf correctly writes: “The departure of the UK is also a tragedy for Europe. The UK has long been the standard-bearer for liberal economics and democratic politics… the effect of a brutal divorce on the EU would also be large.” But Wolf minimizes that by holding that “Britain would be the bigger loser, [so] UK must make concessions to ensure a harmonious and co-operative relationship in future.

I firmly believe Britain has in much been the glue that has held EU together. Therefore, if Britain, before or while negotiating Brexit, I would reach out to all Europeans with a message like:

“Our people have decided to part with EU, not because we dislike EU citizens, or the idea of EU, but in much because of the same reasons so many of you are not satisfied with EU. What do you want to see at the end of these Brexit negotiations? While negotiating should we also not engage in some type of marriage counseling? Who knows perhaps we find something that could make us all live better and happier in or outside EU. Like perhaps forcing those technocrats in Brussels to use a CPAP so that they snore less. One fact though is that Britain cannot move to Australia, and so no matter what we do we will still be neighbors. Would really you and us want to see grumpy faces over the fence all day long?”

Sir, for reasons I have explained before I think that perhaps it is not wise for EU to have a Michel Barnier to negotiate Brexit on its behalf, but I am also weary of those on your side and who might unwittingly want Britain to lose substantially with Brexit, because of an existential need to argue “See I told you so!”

@PerKurowski

Martin Wolf, forget for a while the usual numbers. The society needs all men on deck for much more important tasks.

Sir, when you don’t know what to do, you might spend sometime putting a drawer in order, or sharpening some pencils. That’s the impression I get from Martin Wolf’s “British business is starting to look more Italian” March 10.

There are too many new challenges building up fast and on steroids, and those numbers Wolf so insistently feeds his readers with, might also risk chaining us to no longer valid economic realities or models.

How are we to best manage (and measure) the effect of all those salaries paid to humans that are disappearing because of robots and automation?

How are we to get the decent and worthy unemployments, which a structural lack of jobs indicates we will need more and more?

If we go for something like a Universal Basic Income, do we have the tools needed to measure their adequate levels? A correct dose UBI dose could be magical, but an excessive one, extremely poisonous.

What would happen to Britain and Italy, if their robots do not measure up in capacity to for instance Germany’s?

With risk weighted capital requirements for banks our most important risk takers are told not to take risks, while, without a blinking of an eye, we allow our young to take on debt to study what we all suspect will not generate them any repayment capacity.

Regulators allow a low 20% risk weight for what is so dangerous to banks as what’s rated AAA, while imposing a 150% risk weight on the so innocuous below BB-… and tenured economist or finance professors do not even question that.

Where are the societal debates on all these issues? For instance were there any mention of robots in the recent Brexit and US president election processes?

Martin Wolf, at least for a while forget numbers which importance might have been superseded by events. We need all men (good and bad) on deck.

PS. Of course, just in case “all men” includes all women too.

@PerKurowski

How many more human jobs would there be in xxx, was it not for the unfair competition from robots or automations?

Sir, Sarah O’Connor writes “Britain has been remarkably successful in raising the minimum wage (introduced in 1999) without causing job losses.” “For clues to the productivity puzzle, go shopping” February 22.

How does she know? I have not been in England for some time but when I go shopping in the US and Sweden I sure see plenty of jobs having been taken over by robots and automation. And one of the direct reasons for that is that there is no obligation to pay minimum wages or payroll taxes when employing robots.

PS. Also in order to make sure we get really competitive robots, and do not end up with 2nd class robots we need to tax them, quite a lot

@PerKurowski

If Britain wants to prosper, it needs to rid itself of dangerously loony and useless bank regulation

Sir, Augustus Fukushima writes: “Britain must invest aggressively. Key sectors such as transport, education, and manufacturing suffer from chronic under-investment. The government must not relegate itself to the back seat by assuming a purely regulatory role but must instead lead investment” “Brexit Britain must go on the offensive to prosper” February 3.

Oh if only government had assumed a proper purely regulatory role. But, with their risk weighted capital requirements for banks they distorted the allocation of bank credit to the real economy.

First, with a risk weight of 0% for the sovereign and one of 100% for the citizens they guaranteed the government a too favorable access to bank credit.

Then, with for instance a 35% risk weight for financing houses and a 100% risk weight for SMEs and entrepreneurs; they allowed banks to leverage more their equity with loans to house buyers than with loans to SMEs or entrepreneurs; which de facto means banks earn higher expected risk-adjusted returns on equity on loans to house buyers than on loans to SMEs or entrepreneurs; which results in that banks will much prefer financing the “safe” basements in which kids without jobs can live with their parents, than the “risky” SMEs or entrepreneurs that could help the kids get the jobs they need to be able to afford buying a house and become parents too.

If Britain wants to prosper, it needs to get rid of this dangerously loony and useless bank regulation. Useless? Of course, as Voltaire would have put it if a regulator: “May God defend our banks from what they perceive as safe, from what they perceive as risky they can defend themselves.”

PS. FT’s Future of Britain Project would be much well served by asking the regulators some questions as those in the link below. But we can’t have that can we?

http://subprimeregulations.blogspot.se/2016/12/must-one-go-on-hunger-strike-to-have.html

@PerKurowski

Any regulator stress-testing banks that ignores what should be on the balance sheets and is not, should be fired!

Sir, Emma Dunkley and Martin Arnold report on the recent stress testing of British banks performed by Bank of England, “Stress test flop fuels criticism of turnaround efforts at RBS” December 1.

Just want to remind again that bank regulators who only look at what is on the banks’ balance sheets while ignoring entirely what should be there if the banking needs of the real economy were served, should be fired.

And of course the BoE has most probably not done that. That I say because Mark Carney is one of those regulators who see nothing wrong with capital requirements for banks that uses a risk weight of zero percent for the sovereign and 100% for SMEs and entrepreneurs.

Sir, should the stress testing of our banks also say something about their relative usefulness?

In 1997 I ended an Op-Ed with: “If we insist in maintaining a firm defeatist attitude which definitely does not represent a vision of growth for the future, we will most likely end up with the most reserved and solid banking sector in the world, adequately dressed in very conservative business suits, presiding over the funeral of the economy. I would much prefer their putting on some blue jeans and trying to get the economy moving.”

Sir, I have no detailed knowledge about British banks, but what if RBS was the bank serving Britain’s real 

PS. We need some outstanding Main-Street/Real Economy knowledgeable, to stress test bank regulators

@PerKurowski

For UK to re-engineer its growth model, it needs to de-engineer its loony risk adverse bank regulation model

Sir, Alberto Gallo writes: “At the heart of Britain’s problems is its unbalanced growth model, centred on London and financial services, a lack of investment in sectors that boost productivity rather than asset prices, and the resulting inequality… Britain needs a plan to re-engineer its growth model” “UK must rebalance growth model to steer past Brexit iceberg” October 20

That is a very clear definition of the problem. Unfortunately, among the proposed solutions, Gallo leaves out what needs to happen with bank regulations.

In short, for the umpteenth time, the risk weighted capital requirements for banks hinder these from financing the riskier future, having them only refinancing the safer past. The risk weights of 0% the sovereign, 20% the AAArisktocracy, 35% residential housing and 100% unrated SMEs and entrepreneurs shouts out what is wrong… unfortunately too many, FT included, are blind or deaf.

Unless Britain eliminates the distortions in bank regulations that work against productivity it is doomed to like old soldiers to slowly fade away… living up, little by little, all its past economic achievements.

@PerKurowski ©

I don’t understand how the British people can accept so quietly the Basel Committee’s risk weights.

Sir, Elaine Moore writes: “British debt — one of the oldest securities in the world whose roots can be traced back to King William III’s desire to fund a war in France — should be relatively straightforward. Domestic and international investors regard the UK as a safe bet” “FT Big Read: UK Gilt complexities” September 15.

Moore ignores here the effect of current bank regulations but I must say, to me, as an outsider, it is truly hard to understand how, in these days, the British people allow the Basel Committee to assign them a risk weight of 100% while giving the AAArisktocracy one of only 20% and the Sovereign a 0%.

Where would Britain have been today had these risk weights, that clearly discriminate against the access to bank credit of SMEs and entrepreneurs, been in place since King William III’s days?

Don’t you think that your governments have it easy enough to sell gilt without having to give it this regulatory subsidy?

I wonder if anyone at BoE has given the slightest thought to where interest rates on new gilt sold would be, without a little help from the Basel Committee?

Sir, doesn’t anyone in FT know that the “little help” is paid by the lesser or more expensive access to bank credit of some other? 

@PerKurowski ©

A “Bye-bye-Basel” that frees Britain from dangerous credit risk aversion, would more than compensate Brexit costs.

Sir, Wolfgang Münchau describes a much constructive position with respect to the possibility of a Brexit. "In the event of Brexit, let Britain go in peace", June 13.

With respect to the long-term consequences of a Brexit, Münchau writes: “There are, of course, a number of specific negative economic effects, but also offsetting ones… Economic theory tells us that the wealth of a country ultimately depends on its skills, resources, and the quality of its policies. It is hard to see how Brexit would change that”

If Brexit would allow Britain to also wave goodbye to those stupidly dangerous credit risk adverse capital requirements for banks imposed by the Basel Committee… then Britain could also recover much of that go get it spirit that once made it an Empire.

“Stupidly dangerous”? Yes! First it pushes banks to create excessive exposures to what is ex ante perceived as safe, precisely the stuff major bank crisis are made of; and second it hinder banks from lending sufficiently to “risky” SMEs and entrepreneurs, precisely what makes an economy stall and fall.

@PerKurowski ©

If Britain had applied current bank regulations when it was developing, it might even have found itself below India

Sir, you write: “Even if one puts to one side doubts about India’s economic statistics, private investment remains weak. The government has rightly emphasized improved administration, faster decision-making and greater ease of doing business” and you quote Eswar Prasad of Cornell University ideas with “Markets for land and capital remain distorted. Several public sector banks are in dire shape. They need recapitalization and radical reform”, “Modi fails to exploit India’s great opportunity” April 4.

But again you fail to mention the fact that the Basel Committee’s credit risk weighted capital requirements for banks, which by favoring “the safe” disfavor “the risky”, is as anti-development and pro-inequality as can be.

Do you really think that allowing banks to earn higher expected risk adjusted returns on equity with “the safe” than with “the risky” is the way to go for a country that has not reached sufficient altitude climbing the mountain of development?

And it is not that these bank regulations keep you high up, they also impose a fast descent. With it Britain has expelled its spirited and adventurous risk taking and embraced the risk aversion of the scared.

Hello India, we, Britain, will soon catch up with you, while climbing down.

When the Bible says “But the meek will inherit the land and enjoy peace and prosperity” I am sure it was not to excessive risk-adverseness it was referring.

God make us daring!

@PerKurowski ©