FT establishment, accept that getting rid of a bank regulation that decrees inequality would also help the worst off

Sir, Chris Giles argues that Mark Carney did not live up to his own admonition last week about that the time has come for frank talk about the downsides of globalisation “Frank talk, not warm words, will help the worst off” December 15.

Indeed, Mark Carney, besides being the governor of the Bank of England, is the current chair of the Financial Stability Board, and so presumably well versed in bank regulations. Nonetheless Carney has refused to be frank about the fact that the current risk weighted capital requirements for banks, distorts horrendously the allocation of bank credit to the real economy, hurting growth and job creation; and all this for no purpose at all as major bank crises are never caused by excessive exposures to something ex ante perceived as risky. That regulation de facto decrees inequality.

But with respect to that FT also decided to ignore my soon 2.500 letters sent over the last decade on the subject of “subprime banking regulations”. One of these days, when all truth about the risk weighing really unravels; FT will need to be frank on its reasons for silencing a voice of criticism.

PS. Here are some simple questions that the “without fear” FT establishment has not dared to ask the bank regulation establishment. Or might it be that the “without favour” part of FT’s motto has its exceptions.

@PerKurowski

Often unanswered emails speak much louder than those answered… as well as help to build a case.

Sir, I refer to Lucy Kellaway’s “My solution to the maddening silence of ignored emails” February 2.

You know that in my case I have thousand of unanswered emails of those I sent to the Financial Times and its journalists over the years. And most of these have to do with that regulatory asteroid that hit the earth in 1988, the Basel Accord, and that have ever since distorted the allocation of bank credit to our real economy.

Am I mad because of that? Absolutely not! Quite often unanswered emails speak much louder than those answered.

I know that my criticism and my warnings about what the Basel Committee is doing are based on realities, and so I just have to bide my time. When the truth finally comes out, FT’s silence merits a chapter of its own in the book that will result… and Sir, may I predict you will hope you had answered many more emails.

Meanwhile let me heed some of Kellaway’s advice: “There is no shame in pestering: in a world in which people have largely given up answering at all, it is moronic to ask only once. If the answer was always going to be no, nagging can’t make things worse. And there are enough people… who allocate their time not to those they want to see most but to those who persist longest.”

FT, it was there, right in front of your nose, in 2004, and you still don’t want to see it. Why?

Sir, on November 2, 2004 Charles Batchelor wrote in FT a short piece titled “Basel II favours high quality borrowers”. In it Batchelor describes how the new capital requirements for banks will be very much based on credit ratings, and quotes Kim Olson, the managing director of Fitch saying “banks have an incentive to sell poor quality debt and buy high quality”.

And, as a saying in my country goes, “the child that cries and the mother who pinches him”, of course the banks sold too much poor quality debt, like loans to unrated or not so good rated borrowers, like medium and small businesses and entrepreneurs; and of course bought too much of what has always been most dangerous for banks, namely what was perceived as “absolutely safe”.

And now, soon 5 years after the crisis detonated, precisely because of excessive exposures to those perceived as “The Infallible”, and when now regulators in Basel III, with their liquidity requirements based on perceived risk, are set on giving even more incentives to banks “to sell poor quality debt and buy high quality”, the Financial times stubbornly, I can’t figure out why, remains silent on how the Basel regulations distort the markets and odiously discriminate against “The Risky”.