Congratulations Basel?

Sir Ira Sohn in” Without Basel II it could have been so much worse”, January 31, says "thanks in part, to the Basel II regulations... a global systemic failure was averted". Come on! Be real.

Haven’t the authorities of Basel done enough of self-congratulation over the years to enlist what can only be explained as a spin doctor or a silly fan, and even managing to enlist FT in that?

Of course it is good that banks should take account of the pillar number 2 of Basel II that has to do with operational risks; especially since those rules should have been applied without any Basel regulation; and especially since more operational care might have even been retarded by the regulator not including it in Basel I and forcing banks to focus on other things.

But, what about the other 2 pillars? Pillar 1, the minimum capital requirements based solely on risk as measured by the credit rating agencies, drove the bank risks into no man land with doubtful guides. Pillar 3, market transparency, sounds now only as a bad joke when no one in the market seems to be in a position to understand what on earth is going on.

Relying on financial pre-screeners could be dangerous to your financial health

Sir Ira Sohn suggests that we should “Insist on pre-approval for novel bank processes” November 30, so as to stop bad financiers from exploiting opportunities in regulatory arbitrage. I wish it was that easy. The fact is that most of our current financial turmoil arose from the use of old time tested instruments called mortgages but that were turned into something very explosive and dangerous when they were bundled up and sent away to the financial markets carrying the approval stamp from the credit rating agencies and who found no reason to look closer at the individual quality of the mortgages. There is no pre-screening in the world that would save us, on the contrary, what we have to do is to reduce the power that our current screeners, the credit rating agencies, which only lends itself to lull the world into a false sense of safety.