Financial Conduct Authority dare go after the Great Financial Distorters, your hubristic bank regulating colleagues

Sir, Madison Marriage, Peter Smith and Caroline Binham, reporting on the Financial Conduct Authority’s FCA work on investment managers write that: “tougher measures come as regulators and policymakers are turning their attention from banks to other parts of the financial system that could pose future risks.” “UK financial regulator lifts bar to create one of the toughest investment regimes” June 29.

Yes, but the part of the financial system that poses the most important current and future risks, are the regulators who with their risk-weighted capital requirements for banks, horribly distort the vital allocation of bank credit to the real economy.

Come on FCA, don’t waste time on the small guys, dare go after the big ones, even if they are your colleagues.

PS. FCA, suppose ALL Investment Managers behaved exactly they are supposed to do: Would that create less inequality? Would that represent more or less of a systemic risk?

PS. FCA, how can you help us have the wealthy 1% fall into the hands of really lousy investment managers, so as to fight inequality? :-)

@PerKurowski

It behooves us to stress-test our main bank regulators; the Basel Committee and the Financial Stability Board

Sir, Caroline Binham, Stephen Foley and Madison Marriage report “Systemwide and individual stress-testing of asset managers, as well as examining whether greater disclosure should be made by mutual funds, were among 14 recommendations made by the Basel-based Financial Stability Board to authorities across the G20 nations yesterday” “Stress test asset managers, says FSB” June 23.

Much more important for us is to stress-test bank regulators, to be sure they really know what they’re doing.

Since about two decades I have been asking regulators many questions that have not been answered. And so for a start I would like to ask Mark Carney, the current chair of the FSB; Mario Draghi, the former chair of FSB and the current chair of the Group of Governors and Heads of Supervision of the Basel Committee for Banking Supervision; and Stefan Ingves the current chair of the Basel Committee, the following:

For the purpose of setting the capital requirements for banks, in Basel II you assigned a risk weight of 150 percent to what is rated highly speculative and worse, below BB- but only 20 percent to what is rated AAA to AA.

Gentlemen why did you do that? Major bank crises have never ever resulted from excessive exposures to what is perceived as really risky, but always from what ex ante was perceived as safe but that ex post turned out not to be.

If these regulators are not capable of giving us a credible answer, then I submit they are not capable enough to stress test any bank, asset manager or mutual fund.

And, if they dare answer the first question, then make them explain all this!

@PerKurowski ©

Could a “Vanguard FTSE Social Index Fund” purchase debt of a sovereign like Venezuela, which violates human rights?

Sir I refer to Madison Marriage report in FTfm “Funds in cluster bomb ‘hall of shame’” December 1.

Therein “a spokesperson for Vanguard, which oversees $3tn of assets said:

“For US investors who wish to choose investments based on social and personal beliefs, we offer the Vanguard FTSE Social Index Fund, which excludes companies involved with firearms, tobacco, alcohol, adult entertainment, gambling, nuclear power, or those that violate fair labour practices and equal opportunity standards”.

Holy moly, what a mixture of issues! Questions:

How were for instance adult entertainment and gambling thrown into the same bag as nuclear power and equal opportunity standards?

Have strippers and croupiers not the right to an equal opportunity of seeing their jobs financed?

Considering the Equal Credit Opportunity Act (Regulation B) in the US, are these types of funds really legal?

Has not planet earth right to nuclear power in order to avoid having to more coal that is more dangerous for the environment?

Is there a fund that excludes countries, like Germany, which now are dismantling the use of nuclear power?

In general are there any sovereigns excluded? What about for instance the purchase of Venezuelan debt when the UN Human Rights Chief urges it to release arbitrarily detained protestors and politicians?

As a citizen, more than credit ratings, I would perhaps want to see more use of ethic and good governance ratings.