Any regulator stress-testing banks that ignores what should be on the balance sheets and is not, should be fired!

Sir, Emma Dunkley and Martin Arnold report on the recent stress testing of British banks performed by Bank of England, “Stress test flop fuels criticism of turnaround efforts at RBS” December 1.

Just want to remind again that bank regulators who only look at what is on the banks’ balance sheets while ignoring entirely what should be there if the banking needs of the real economy were served, should be fired.

And of course the BoE has most probably not done that. That I say because Mark Carney is one of those regulators who see nothing wrong with capital requirements for banks that uses a risk weight of zero percent for the sovereign and 100% for SMEs and entrepreneurs.

Sir, should the stress testing of our banks also say something about their relative usefulness?

In 1997 I ended an Op-Ed with: “If we insist in maintaining a firm defeatist attitude which definitely does not represent a vision of growth for the future, we will most likely end up with the most reserved and solid banking sector in the world, adequately dressed in very conservative business suits, presiding over the funeral of the economy. I would much prefer their putting on some blue jeans and trying to get the economy moving.”

Sir, I have no detailed knowledge about British banks, but what if RBS was the bank serving Britain’s real 

PS. We need some outstanding Main-Street/Real Economy knowledgeable, to stress test bank regulators

@PerKurowski

And what about a revival of ethics in the bank regulatory establishment?

Sir, ‘Day of shame’ sparks call for a revival of ethics, writes George Parker, February 7, with respect to many loud and outspoken demands from politicians to hold the financial sector to higher standards.  

But though Andrew Tyrie, the Tory chairman of the Commons treasury committee rightly said "that high-quality regulation was not just morally right but would attract business to the UK”, there is not one single of them urging the bank regulators to come clean on their outright immoral (and dumb) concoctions.

Because it is indeed immoral to impose on the banks capital requirements which favor bank lending to those who already find themselves favored by banks and markets, “The Infallible”, while odiously discriminating against bank lending to those already discriminated against by banks and markets, The Risky”.

Because the regulators with those regulations have in fact, without having been authorized thereto, castrated the banks, and, with it, blocked the will of a nation to take the risks it needs in order to move forward, so as not to stall and fall… and that my friends, might not only be immoral, but it might even be an outright act of high treason, even if unwittingly committed

Oh please, don’t come with that never ending BS of banks taking excessive risks by creating excessive exposures to what was perceived ex ante as “risky” and which therefore required the banks to hold any substantial amount of capital against it. Give me just one example of that, or shut up!

Regulators bully banks, banks bully “The Risky”, and “The Infallible”, they just have a blast.

Sir, Brooke Masters, Claire Jones and Patrick Jenkins report “Big banks’ capital needs under microscope” November 30. 

"Regulators suspect banks have understated possible losses and need a 'material' amount of extra capital"

Of course I favor more capital in the banks, at least for their exposures to ‘The Infallible”, which are seriously under-capitalized as a result of overly generous capital requirements. 

But what regulators must remember is that while different capital requirements for different assets exists, their pressures on banks to increase their capital, will be mostly felt by those who generate the largest capital requirements, namely “The Risky”, like small business and entrepreneurs. 

Regulators bully banks, banks bully “The Risky”, the small businesses and entrepreneurs, and “The Infallible”, sovereigns and triple-A ,they just have a blast getting even more bank funds at even lower interest rates.

PS. Could these type of capital adjustments not trigger the conversion into zero clause of Barclays' recent $3bn contingent capital notes deal?   

FT, why do you go so much softer on regulators than on bankers?

JP Morgan Chase’s recent losses, Barclays’ manipulation of Libor, RBS’s IT failures and the money laundering assistance provided by HSBC, though all absolutely unpardonable, some most probably criminal, amount, in terms of real damages to the economy, to not more than some pick-pocketing, when compared to the harm that the bank regulations did, with their capital requirements for banks based on perceived risks already cleared for. 

All of which makes me wonder again, for the umpteenth time, why the Financial Times treats the bureaucrats of financial regulations with kid gloves when compared to how they treat the bad bad bankers, as for instance in Patrick Jenkins’ and Brooke Master’s “London’s precarious position” July 30, 2012.