Should not the private marketing of $31tn sustainability investments at least get the same scrutiny as the Green New Deal?

Sir, Richard Henderson writes about a “$31tn push to … address the world’s ills — from climate change and child labor to the dearth of female executives.” “Europe leads $31tn charge into sustainable investing” June 1.

What? An amount about 40% of the world’s GDP, about 80% of Europe’s and the US’s GDP, to be invested, mostly by some few, into projects that might not have any chance to recover the investment, or that could produce a much lower than expected contribution to the solving of the problems than offered. It sounds just like an Alexandria Ocasio Cortez’ Green New Deal.

The Financial Stability Board has a Task Force on Climate-related Financial Disclosures (TCFD) because: “The Disclosure of climate-related financial information is a prerequisite for financial firms not only to manage and price climate risks appropriately but also, if they wish, to take lending, investment or insurance underwriting decisions based on their view of transition scenarios.”

As I see it FSB needs, even more than the TCFD, a task force to consider the risks of all these help-to-the world investments; at least to make sure that the final result is not that of mostly having enriched the intermediaries.

Sir, I do not take the threat to climate change lightly but, if we are going to be able to do something important about it, we must keep an eye on the spending. Otherwise the consequences could be even worse… like if not being able to prevent global warming then not either being able to afford mitigating some of its consequences.

And before $ trillions are poured into good intention but adventurous projects, lets make sure the market signal are working at full intensity, for instance by means of a very high revenue neutral carbon tax, that is shared out equally to all citizens.

Why does the private marketing of $31tn in sustainability investments not get the same scrutiny as the Green New Deal?

http://ourpiedaterre.blogspot.com/2017/04/solutions-that-share-out-all-benefits.html

@PerKurowski

“Any populism yours can do, mine can do better; mine can do populism better than yours” “No he can’t!” “Yes he can, yes he can, yes he can!!!!”

Sir, Simon Kuper ends his “Secrets from the populist playbook” March 16, with “Some new politicians, notably the new Democrat congresswoman Alexandria Ocasio-Cortez, can rival Trump for engagement. To some degree, we are all populists now.” “Secrets from the populist playbook”, March 16.

Indeed but the populists must also be measured with respect to the success they have when selling their populism.

For instance, our current bank regulators must be some of the most successful populists ever. Just think how they have managed to convince the world (most or all in FT included) that by imposing risk weighted capital requirements for banks, they are reducing the risks for our bank system. With that they have distorted the allocation of bank credit all over the world, weakening the economies and increasing the dangers of a systemic meltdown of our banks. 

Sir, I am from Venezuela, and so unfortunately I know too much about populists, but, when compared to the Basel Committee on Banking Supervision’s and the Financial Stability Board’s populism, Hugo Chavez was just a quite gifted amateur.

@PerKurowski

PS. My 2019 letter to the Financial Stability Board (FSB)

BoE’s FSB' Mark Carney should not be allowed to use Brexit cost estimates to distract us from the distortion of bank credit costs.

Sir, you write: Bank of England’s Mark Carney has come out with a “suggestion that average household incomes are £900 lower than they were expected to be before the Brexit referendum.” “A necessary statement of the obvious from Carney” May 26

But Carney is also chair of the Financial Stability Board, and he therefore belongs to those regulators who do not care one iota about distorting the allocation of bank credit to the real economy, since they are convinced banks will be safer with their risk weightedcapital requirements… all as if the health of the economy is not the most important pillar of a stable bank system.

First try to calculate how much more credit has been given to fairly unproductive but “safe” sectors, like housing, compared to with how much less credit has been given to potentially much more productive but “risky” ends, like loans to entrepreneurs. And then try to come up with a bill for that. Clearly that must have cost and keeps on costing the average household income inBritain, many multiples of £900; and the regulators are not in the least being held accountable for that.

But Sir, since FT has also steadfastly kept silent on the costs of misguided credit allocations, you might also share the same interest in distracting with Brexit 

@PerKurowski

One day, Stanley Fischer, like most current central bankers and regulators, will ask himself, why did I not see that?

Sir, Sam Fleming writes: “Fischer worries about attacks by lawmakers on global regulatory bodies such as the Financial Stability Board, arguing that the rules it proposes are good for the world if everyone adopts them.” “Lunch with the FT Stanley Fischer ‘It’s dangerous and short-sighted’” August 19. Like Gershwin wrote it, “It ain’t necessarily so!”

In November 1999 in an Op-Ed in Venezuela I wrote: “The possible Big Bang that scares me the most, is the one that could happen the day those genius bank regulators in Basel, playing Gods, manage to introduce a systemic error in the financial system, which will cause its collapse”

In April 2003 as an Executive Director of the World Bank I argued that Board that "A mixture of thousand solutions, many of them inadequate, may lead to a flexible world that can bend with the storms. A world obsessed with Best Practices may calcify its structure and break with any small wind."

And in January 2003, FT published a letter in which I stated: “Everyone knows that, sooner or later, the ratings issued by the credit agencies are just a new breed of systemic errors, about to be propagated at modern speeds”

Sir, had regulators not introduced their risk weighted capital requirements for banks, made worse by the importance given to some few human fallible credit rating agencies, the 2007/08 crisis would not have happened; and the economy, net of automation and demographic factors, and considering the outlandish stimuli, would not be as stagnant as it is now.

PS. That Op-Ed I referred to above also included: “I recently heard that SEC was establishing higher capital requirements for stockbroker firms, arguing that “. . . the weak have to merge to remain. We have to get rid of the rotten apples so that we can renew the trust in the system.” As I read it, it establishes a very dangerous relationship between weak and rotten. In fact, the financially weakest stockbroker in the system could be providing the most honest services while the big ones, just because of their size, can also bring down the whole world. It has always surprised me how the financial regulatory authorities, while preaching the value of diversification, act in favor of concentration.”

Let me translate that into the current risk weightings. “It establishes a very dangerous relation between risk and the right to access credit. The “risky”, like SMEs, could be providing the most important additions to the real economy, while sovereigns and AAA rated, just because of their perceived “safety”, could bring the whole world down.”

@PerKurowski

Since the risks regulated for are not the right risks, meeting risk weighted bank capital requirements means little

Sir, Philip Stafford reports “Reforms put in place by the Group of 20 leading nations have successfully tackled the most pressing issues that contributed to the crisis, according to the annual report from the Financial Stability Board, an international group of policymakers and regulators.” “Financial reforms: Shadow banking tamed, argues global watchdog” July 4.

Nonsense! If all evidences are duly reviewed, what most caused the crisis was the risk weighted capital requirements for banks. These allowed banks to leverage immensely, and thereby earn very high expected risk adjusted returns on their equity, with what was perceived, decreed or concocted as safe, like financing houses, sovereigns like Greece or the AAA rated securities backed with mortgages to the subprime sector.

The regulators regulated as if they were bankers. As regulators they should look at the risk that the risks are not adequately perceived or managed, and at the possibility of unexpected events. 

And that stupid risk weighting has not been eliminated because of the introduction of a non-risk based leverage ratio; on the contrary as that LR pushes up the capital floor, it might squeeze even more those affected by the roof set by the risk-weighted portion.

And regulators have also introduced additional sources of distortions like the liquidity requirements, which also are based on simplifications about what is liquid and what not. 

Their test of the stresses a la mode, or the elaboration of wills that might affect the living, could also signify new sources of systemic risks.

No the regulators have done a lousy job, primarily because they all circled their wagons around the mistakes they committed.

And if they go on doing what their mutual admiration club’s groupthink tells them to do, let’s hope the shadow banking sector goes underground, so that regulators don’t get their dirty nannying fingers around it too.

PS. No wonder FSB's "safer", "simpler" and "fairer" financial system video, has the comments disabled.

PS. I need a co-author that writes well and knows something about banks and finance, to help me write a book based on more than 2.500 letters ignored by FT

Current bank regulating technocrats posing as scientifically knowledgeable are just vulgar impostors.

Sir, Anjana Ahuja refers to how Galileo was imprisoned by the Roman Catholic Church for his conviction that the Earth went round the Sun, and warns scientists may well feel the heat from those in power once again, referring here clearly to Donald Trump. “Echoes of Galileo in the populist retreat from reason” December 7.

Sir, careful there, often those in power masquerade as scientists. For instance bank regulators of the Basel Committee and the Financial Stability Board, behave much more like theologians than the scientists they purport themselves to be. Their creed is: Assets perceived ex ante perceived as risky are ex post risky, and so banks should therefore hold more capital against these.

And if a third, or much lesser class Galileo like me, dares to argue that what is perceived as risky, becomes less dangerous precisely because of that ex ante perception; while what is perceived as safe becomes more dangerous precisely because of that ex ante perception, then he has to be ignored and his questions should not be answered. 

Sir, you want further proof about these fake scientists? Ahuja writes: “Why is science under siege? One possible explanation is that it favours objective evidence over subjective experience.” Well, the Basel Committee never even researched in order obtain objective evidence of what has caused all previous major bank crises, before adopting their own subjectivity as their guiding light.

Lately I have been wondering whether I need to go on a hunger strike or take similar extreme actions, in order to get some response to some very basic questions from the impostors. But perhaps I should refrain from doing so, since I could be burned at the stake… and without the science respectful FT, perhaps also feeling alleviated, not even reporting on the incident.

Like Martin Luther I might just nail my questions on some Church door in Basel, and take it from there.

PS. Let us not forget that Galileo's views were at one moment considered "alternative facts" or "fake news"

@PerKurowski

Regulation distortions, sure makes finance information on banks extra hard to grasp.

Simon Samuels writes about bank financial reports of 600 pages, “Too much information makes finance hard to grasp” April 25.

Sir, since the 2007-08 crisis, I have read at least 50 editorials, articles or research papers, written by first class newspapers, experts or renowned academicians, that have compared the capital to assets ratios of banks of before the 90s, with the capital to risk weighted assets of the Basel I, II and III… in order to show how bank capitalization has evolved.

In fact even prominent regulators have fallen in their own trap.

For instance in this letter I pointed out the mistakes of Alan Greenspan.

Besides, what’s the use of risk weighted capital to asset ratios if no one understands what the risk weights are and how these came into being, like for instance the zero percent for sovereigns?

Sir this is the prime example of how regulation has distorted information and makes the finance information on banks hard to grasp.

PS. Do you want me to review my blog and count the times FT and its people got it wrong but ignored my letters on it?

PS. By the way in my letters I have found that Simon Samuels, related to the Financial Stability Board, seemingly has not much against the concept that regulators should act as risk managers for the world. Boy it does takes a lot of hubris for that! 

@PerKurowski ©

Could bank regulators, like Mark Carney, have accepted responsibilities for something they are not really qualified for?

Sir, you write: “Mr Carney acknowledges the concern that keeping interest rates very low for a long time may fuel a sharp rise in risky lending. It does not take a genius to see this, he adds, showing some frustration at the chorus of commentators warning of a credit bubble.” “Carney is right to keep UK interest rates on hold” January 20.

But, forget the interest rate for a second. Carney also wears the hat of the Chair of the Financial Stability Board. And, does it take a genius to understand that allowing banks to earn the highest risk adjusted returns where they most want to earn it, where it is perceived as very safe, will create, sooner or later, a bank credit bubble?

Here below is a question that we do not know how Mark Carney would answer it, because seemingly it looks that no one dares to make it… at least not FT.

Introduction:

The Basel Committee decided that in order to make banks safe, these need to hold more capital (equity) against assets perceived as safe from a credit risk point of view than against assets perceived as risky. 

For instance in Basel II a private sector asset rated ‘prime’ AAA carried a 20 percent risk weight while an asset rated ‘highly speculative’ below BB- had a 150 percent risk weight. That meant banks needed to hold 7.5 times more capital against a below BB- rated asset than against an AAA rated asset.

Allowing banks to leverage their equity differently based on credit risks obviously distorts the allocation of bank credit to the real economy, something that by itself could also be very dangerous for the safety of banks.

And the only way those risk weighted capital requirements for banks could be justified, would be if they really made banks safer.

And so the question:

Mark Carney, Sir, would you be so kind so as to provide us with one example of a major bank crisis that has resulted from excessive bank exposures to assets that were perceived as risky when placed on the balance sheet of banks.

I mean we can think of many instances were bankers were lulled into a false sense of security by good credit ratings, but I cannot for my life imagine bankers building up excessive exposures to something rated below BB-. Can you?

Sir, if Carney is not able to answer that very straightforward question adequately, it might indicate he has accepted a responsibility he is not fully up to and that should be worrisome… wouldn’t it?

Could it not be this bank regulatory distortion that impedes low interest rates and other stimulus to reach where it is most needed, like to SMEs and entrepreneurs?

@PerKurowski ©

Sir FT, are you now preparing Mario Draghi’s future defense?

Sir, I refer to your “Draghi’s impatience at the slow pace of reform” May 29. In it you write: “Mr. Draghi’s latest intervention betrays impatience [with the lack of structural reform] that he risks stepping across the border that separates his sphere from that occupied by the democratically elected… Institutions such as the ECB play a valuable role when providing advice and gentle advocacy. But any reforms that appear to arise at the bequest of an unelected official, particularly one with such power as Mr Draghi, may struggle to take root”.

I hope you are not trying to imply that the former chair of the Financial Stability Board is not speaking out against the stupidity of the bank regulations he was partly responsible for, only out of respect to local politicians. That defense strategy of Mr. Draghi is not acceptable.

Really, unless blessed with eternal ignorance, how can bank regulators live with themselves knowing what they are doing?

Really how can journalists live with themselves knowing how they silence truths?

PS. Is there anything as stupid and paternalistic as regulators forcing bankers to consider risks they already perceive?

Thanks "Learning from dogs" for the heads up for this photo

@PerKurowski

Mario Draghi, for Europe’s and our young's sake, go home. And for your own, stop embarrassing yourself.

Sir I refer to Claire Jones’ “Draghi warns central banks against blind risk taking.” May 15.

Who understands it? “Mario Draghi has warned central banks to beware of the risk that aggressive monetary easing, including mass bond buying, [that which he has been promoting in the ECB] could lead to financial instability and worsen income inequality.

How shameless can you be? As the former Chairman of the Financial Stability Board he is as responsible as anyone else for bank regulations that have completely distorted the allocation of bank credit to the real economy.

He is quoted saying “After almost seven years of a debilitating sequence of crises, firms and households are very hesitant to take on economic risk”. Yes but the truth is that by means of the credit-risk-weighted equity requirements for banks he supports, he and his colleagues are de facto ordering the banks not to finance economic risks.

And he has the toupee of arguing that if ECB had refrained from its QE action, this “would have penalized young people”. No! There is nothing that penalizes young people as much as excessive sissyesque risk-aversion present in current bank regulations. Mr. Draghi, do you really know what is a real terrorist attack on our children’s future? I tell you, again: A risk weight of 0 percent for a sovereign and of 100 percent for SMEs or entrepreneurs.

And Draghi also has the toupee of warning that ECB’s policies could “exacerbate wealth disparities”. Amazing. He must by now be well aware of that current regulations impede bank credit going to where it is most needed, to finance the future and give those who have little opportunities; and directs credit to where it is “safe”, to refinance the past and keep up the value of the assets that exist and already have owners.

Mario Draghi, go home.

@PerKurowski

The most incapable and failed risk-manager in history, insists on helping banks to manage their risks.

Sir, Caroline Binham and Lindsay Fortado report that US regulators now include qualitative assessments of banks’ risk-management, “Banks still struggling with finance ethics” May 15.

What a laugh… how sad. If ever there have been incapable and failed risk managers, those are the current bank regulators. Here follows but some illustrations of it.

First, they set the equity requirements for banks based on the perceived risks of bank assets, more-risk-more-equity and less risk less equity, as if that has any real bearing on the risk of a bank. The risk of a bank depends on how banks manage the risk of their assets. And, if push comes to shove, since all major bank crises have been caused by excessive bank exposure to what was ex ante perceived as “safe”, the opposite requirement, less-risk-more-equity, would have been more appropriate.

Then they also entirely ignored the risk that their regulations would distort the allocation of bank credit in to the real economy, in such a way it would weaken it… and that nothing is as dangerous to banks as a weak economy.

Sir, frankly, had there been no regulators or bank regulations how many European banks do you think would have been allowed to leverage 20 to 50 times or more their equity? Does not zero sound like a good guess?

In 1999 in an Op-Ed I wrote: “The possible Big Bang that scares me the most is the one that could happen the day those genius bank regulators in Basel, playing Gods, manage to introduce a systemic error in the financial system, which will cause the collapse of our banks”.

And we still allow these clearly failed bank regulators to play Gods. Well shame on us!

@PerKurowski

Has Europe fallen into the hands of a Chauncey Gardiner like figure?

Sir, I refer to Joel Lewin’s “European QE redraws junk bond frontier” April 14.

Were the implications not so tragic one could have joked about Europe having fallen into the hands of a Chauncey Gardiner like figure; the gardener elevated to Economic-Guru in Jerzy Kosinski’s “Being There”.

ECB’s/Mario Draghi’s seems not to understand the dangers of flooding the markets with QE liquidity, while the channels for that to flow by means of bank credit to where it is most needed, like to SMEs, are clogged. Firmly clogged by senseless credit-risk-weighted equity requirements for banks.

The overflow of liquidity, into more risky bonds, creates clearly serious risks for individual investors. But, for the economy at large, much worse is the dangerous overpopulation of the “safe-havens”; and the even more dangerous refusal to explore the risky bays, where there is a chance to find what could feed the future.

At least a normal gardener would now you need to water the plants, but not too much.

@PerKurowski

Here’s another reminder of how scary our current bank regulators really are.

Sir, the Lex Column writes about “Nigerian banks: wrong concentrations” March 27.

I just thought it would be a good opportunity to remind everyone that we have put our banks into the hands of regulators who, on their own, have decided to impose “portfolio invariant” equity requirements for banks. And that means the regulators do not consider the benefits of diversification, nor the dangers of concentration.

By their own admittance, to do otherwise, would be too hard work for them.

Scary eh?

@PerKurowski

While regulators think they’ve done theirs with banks, the regulatory distortion of credit allocation is in crescendo.

Sir, according to Steve Johnson “Mark Carney, suggest that global regulators have now cleaned up the banks, with their notoriously high levels of leverage, and had a new target in their sights”, “The big elephant in a small pond effect” February 2.

That is very serious coming from the Chair of the Financial Stability Board because when it comes to regulators, they have definitely not cleaned up their act.

As I have told you many times lately, as a result of regulators increasing the floor level of bank equity requirements, primarily with the leverage ratio, the effective squeeze on those borrowers being discriminated against by means of the credit risk weighted equity requirements, like small businesses, has only gotten worse. If in need you should see the film “The Drowning Pool” to understand visually what is going on.

And in that respect it is clear that the regulatory distortion is in crescendo while it is still being ignored. Sir I wonder how long will it take FT get it? That an AAA rated client cannot get access to bank credit because the bank only has sufficient required equity so as to be able to lend to an “infallible sovereign”?

There will probably be a tragicomedy musical named “Mario” in our grandchildrens' future

Sir, John Kay does the debate on the economy a great favor by helping to place “deflation” in a wider perspective than that of being a definitive falling over the precipice point; and which amazingly has so many mature men running around like scared chickens, “History is the antidote to fear of falling prices”, January 28.

I am sure that in due time, the living in times of the deflation monster, as well as the banking in times of the Basel Committee, will provide great comedy and drama material for films and musicals… as we had “Evita” our grandchildren will probably have their “Mario”.

Basel Committee, Financial Stability Board, you are dangerously devoid of any common sense

Sir, I refer to Lucy Kellaway’s courageous and important “How insecurity and preening kill corporate common sense” January 19.

Kellaway, from a conversation “with a man who used to be one of the most senior bankers in the UK”, deducts: “Complexity mostly destroyed what little common sense there used to be and regulation has outlawed the rest. Try understanding any bank’s annual report. It cannot be done. Even the senior bankers who put the figures together admit as much. Worse still, try to comprehend Solvency II. If there is anyone reading this who fully grasps the fiendish vicissitudes of these new capital requirements for insurers, I’d like to hear from them.”

And I call it “courageous” because with that she actually implies that her colleagues write about nonsense as if it made sense; or that they do not dare to show they do not understand whether it is nonsense or not.

And I call it “important” because truths need to come out, and powerful nonsense manufacturers brought down, if our children and grandchildren are to stand a chance.

Hear us out you the members of the Basel Committee and Financial Stability Board… little is as stupid and dangerous as the current portfolio-invariant-credit-risk-weighted-equity requirements for banks you concocted. Not only do these not make our banks safer but, worse yet, these distort the allocation of credit to the real economy.

Answer us: How risky can borrowers perceived as risky really be for the banking system? Is it no so that what is really risky for the banking system is what is perceived and treated as “absolutely safe”?

I dare you to debate me on that wherever and whenever. If you feel more comfortable with some support, you can even bring along any FT journalist fan of yours you wish… and I will bring along Lucy Kellaway.

Basel Committee, Financial Stability Board: Hear hear… Tim Harford’s "The Power of saying ‘NO’"

Sir, hear hear… Tim Harford’s, “The Power of saying ‘no’”, January 17.

“Please, please, dear bank regulator, allow us lower equity requirements on these ultra safe exposures and we promise that will stay away from what’s risky”

Absolutely NOT! The real bank crises have always occurred when something ex ante was considered as “absolutely safe” so I will not run the risk of next time that happens, you will, because of me, stand there with your pants down and no equity. Copy: finance.historians@gmail.com

Absolutely NOT! If I allow this, then I will not be able to look into the eyes of all those small businesses and entrepreneurs, who will be denied credit as a result of favoring the AAArisktocracy; or into the eyes of all those young unemployed, who could become a lost generation if I did so. Copy: risky.borrowers@gmail.com unemployed.youth@gmail.com

PS. But, unfortunately, bank regulators did not have it in them to say “NO!” to bankers.

For Basel IV should we not expect equity requirements for banks based on regulation and central banks risks?

Sir, I refer to John Authers’ “Lessons to be leant from Switzerland doffing its cap” January 17.

Whatever, this really places the fact that regulators and central banks impose credit-risk-weighted equity requirements for banks, when they themselves are the source of so much risks, in a totally new perspective.

Frankly, it must be much easier for banks to clear for credit risks by means of interest rates, size of exposure and other contractual terms than what it can be for them to clear for regulatory and central bank risks.

And so for Basel IV, we must now expect equity requirements for banks based on regulation and central banks risks… what a conflict of interest for regulators and central banks! That might indeed seriously affect the friendly collegiality that reins in their mutual admiration club.

Basel Committee, do we now need trustworthiness of central banks ratings?

Financial Stability Board, what trustworthiness ratings would you assign to Draghi-ECB or to Carney-BoE?

European Court of Justice. Beware, ECB's Mario Draghi does not know what he is doing, and if he does, then so much worse!

Sir Ralph Atkins writes “Trust them, they are central bankers… That, in essence, will be the European Court of Justice’s thinking on government bond buying by the European Central Bank” “Short View” January 15.

Trust them? Hah!

“Your Honor, Mario Draghi, the President of the European Central Bank, is the former Chair of the Financial Stability Board. As such he helped to impose on banks equity requirements that limited the leverage of bank equity to about 12 to 1 when lending little to a small European business or entrepreneur, but allowed banks to leverage 60 to 1 and even more when investing in AAA rated securities backed with mortgages awarded to the subprime sector in the USA or lending to such an “infallible sovereign” like Greece.

Your Honor, I am sure that when hearing this you will dismiss as utter nonsense, the claim presented to you, that central bankers know what they are doing.

And if by any chance he really knew that, so much the worse. That would mean he was on purpose discriminating against all european small businesses' and entrepreneurs' rights of having fair access to bank credit ... No wonder there is a shortage of jobs in Europe!

And judge, you won't believe this... now they want to inject more liquidity into the markets with what they call Quantitative Easing... QE... without first removing the regulatory distortions that impedes bank credit to be allocated efficiently in Europe”

Basel Committee and Financial Stability Board… please… Let it go¡

Sir, January 2003 in a letter you published I wrote: “Everyone knows that, sooner or later, the ratings issued by the credit agencies are just a new breed of systemic error to be propagated at modern speeds”.

And so one could assume that when Sam Fleming now, December 23, reports that “Banks face sharp restriction on use of rating agencies in loan risk assessment” I should be satisfied.

I am not! Because now the regulators want to impose other criteria to be used by banks for calculating how much capital (equity) they need to hold against an asset.

For instance: “Corporate exposures would no longer be risk-weighted by reference to the external credit rating of the corporate, but they would instead be based on a look-up-table where risk weights range from 60% to 300% on the basis of two risk drivers: revenue and leverage.”

And so all regulators are doing here is introducing new sources of systemic risks; and defining new tools to be used in gaming a system the regulators set up to be gamed.

Why can’t regulators just let it go and let the banks use any method each one of them finds appropriate to measure credit risks; and why can’t they just fix one capital requirement for all assets… no gaming allowed?

Sir, let me explain it to you again, for the umpteenth time.

Do you agree Sir with that a bank will and should decide how much to lend, at what interest rates and on what other terms, based on the credit-risk he perceives the borrower represents?

I assume you answer "yes" Sir, but so then, why on earth should bank regulators also stipulate that the same perceived credit-risk is also to be cleared for in the capital (equity) account of the bank? Is not clearing for the same perceived risk twice overdoing it? 

Does that not mean for instance that, if we instead of allowing two nannies to use their average risk aversion when taking care of our kids, we allow them to apply the sum their risk aversions, then we would run the risk of making real monumental wimps out of our kids?

Sir, it is very clear that our bank regulators are digging themselves and our banks ever deeper in a horrible hole of their own creation. That could be because they do not want to admit their mistakes or, much worse, God help us, because they still do not understand their mistakes.