FT, John Plender, it was FIVE years ago that I told you “Simplicity in banking should always take precedence”

Sir, John Plender writes that Deutsche Bank’s net equity in 2007 amounted to just under 2 percent of total asset, meaning an over 50 to 1 leverage, while “its tier one core capital under the Basel weighted capital was 8.6 percent” which implies a lower than 12 to 1 leverage, “Simplicity in banking should always take precedence” December 7. 

As a consequence of not reading up sufficiently on what Basel II really was about you were duped. On my TeawithFT blog you can find hundreds of letters that tried to explain the Basel distorted bank leverages to you. You ignored these and even kept on again and again comparing the Basel risk-weighted bank leverages with the historic un-weighted bank leverages. 

And this amounts to a quite sloppy journalistic job and a general lack of questioning capacity in FT. 

And now on “simplicity” 

On December 19, 2007, John Plender, in “Investors pray for acts of God but even they come at a cost”, asked, what is the right level of capital for today´s financial world? 

And here is the answer to that that I wrote to FT, and to John Plender, five years ago: 

“Since it is in fact impossible to calculate the right capital then the best thing would be to be humble about it and require one single capital requirement on assets, instead of arrogantly trying to outwit the market as the regulators did when they created their current minimum capital requirements that differentiates based on how risks are perceived, primarily by the credit rating agencies. 

It is when the regulators themselves start acting like God that they really set us up for the big systemic disasters.” 

Does FT really have the "without fear and without favour" in it itself to recognize those who have been right all the time, even though these do not belong to FT’s own crony intimate circle?

Has someone really gone bonkers with Barclay’s contingent capital notes?

Sir, I refer to Mary Watkins’ “Barclays’ total loss bond poses test for ‘coco’ markets” November 23, as well as to Patrick Jenkins’ “Banks unnerved by BoE’s extreme focus on capital” November 20.

There is something I cannot figure out about these bonds, perhaps you can help me, or perhaps it is just one of those “blind spots” to which Gillian Tett refers to in “Investors must search for the next financial blind spot” November 23.

It states that under the terms of the deal, that the bonds will be automatically written down to zero if the bank's Common Equity Tier 1 ratio falls below 7% , and I assume that this is on a risk-weighted basis since I Barclay surely holds less than 7 percent in capital against all its assets.

If so, what happens if Barclays’ management decides, own its own, to move some assets with low risk-weights, “The Infallible”, which require holding little capital, into assets with a higher risk-weight, “The Risky”, and which therefore require holding more capital, and therefore cause the bank’s Common Equity Tier 1 ratio to fall below 7%?

Or, alternatively, what happens if the regulators decide to change the risk-weights and thereby Barclay's Common Equity Tier 1 ratio to fall below 7%? 

If it is as I do not want to believe it is then management (or regulators) can, without Barclays losing a cent on its assets, get all these bonds written off. Sounds crazy! And, if so, would management be able to collect a bonus on that very real profit?

PS. Will shareholders require management to adjust the bank portfolio in such a way that Barclay's Common Equity Tier 1 ratio falls below 7% and it does not have to repay the bondholders? 

PS. Will bondholders require management to adjust the bank portfolio in such a way that Barclay's Common Equity Tier 1 ratio stays over 7%, so that they will be repaid? 

PS. Have regulators now been de-facto impeded to change the risk-weights? 

PS. Who is going to sue who?