Way too many have kept busier defeating Brexit than saving Britain, come what may.

Sir, Philip Stafford writes “City executives describe the EU’s no-deal plans as a ‘nakedly political’ grab for London’s business” “Tail risk” April 9.

Alex Barker in “Barnier vs the Brits” FT already in November 2011, wrote about the fears of Sir Mervin King held about that some Brussels reforms would reshape a vital British industry, banking, to the benefit of eurozone rivals. 

Specifically Barker mentioned: “Underlying the alarm in London is a more visceral fear: that Mr Barnier’s backers on the mainland are using this regulatory marathon to sap London’s strength as Europe’s pre-eminent financial centre.”

And that was when Michel Barnier was only the “European internal market commissioner – a perch giving him oversight of the continent’s financial industry. Arguably, no European Union job is of more consequence for the UK.”

Well yes, there was. Now Michel Barnier, since December 2016, is the European Chief Negotiator for the United Kingdom Exiting the European Union, a job with even more consequence for the UK.

Given the previous rough relationship between Britain and Monsieur Barnier, one could have made a very well argued case that his appointment served no one well. And I am sure many EU nations would have understood that.

As a friend of Britain, I have one way or other argued the previous on several occasions, but with no luck. I believe that is because way too many were kept too interested in just defeating Brexit and so, to try for a better Brexit, did not fit their plans.

https://teawithft.blogspot.com/2017/03/is-michel-barnier-really-sure-about.html

https://teawithft.blogspot.com/2017/07/european-citizens-must-solve-brexit.html

https://teawithft.blogspot.com/2017/07/should-not-mr-michel-barnier-negotiator.html

https://teawithft.blogspot.com/2018/04/what-kind-of-tariffs-is-protectionist.html

@PerKurowski

With regulators like Mark Carney there is no future in finance for the City, or for the rest of the economy for that matter

Sir, John Gapper writes that Mark Carney, the new “Bank of England governor, has arrived from Canada with a dose of can-do spirit”, “Carney is wise to nurture the City´s future in finance” October 31.

“Can-do spirit”? Ha! There is nothing as far from a can-do spirit than capital requirements for banks which are higher for what is perceived as safe, than for what is perceived as risky. These not only guarantee that banks will not finance the future but mostly refinance the past, but also guarantee the kind of distortions that will make it impossible for the banks which are not in the shadows, to survive.

How can we have reached a point where we can write about “a knowledge industry that has been vital to growth and trade since the 19th century” blithely ignoring there is no way that 19th century banks could have done what they did, with current regulations.

Let me try to explain the regulatory lunacy again, in terms of knowledge. If banks know (or believe they know) the risks, and adjust for these in interest rates, size of exposures and other terms, what business have regulators adjusting for exactly the same “know” in the bank capital?

The role of a banker is to stop his bank from failing”, while the role of a regulator is to see how to stop bankers from failing to stop their banks from failing, and, if banks fail, to see that the hurt will be contained as much as possible. In other words: Though a banker might very well look at credit ratings, a regulator must not look at these, but at how bankers look at credit ratings. Why is it so hard for Mark Carney and his colleagues (and John Gapper and his colleagues) to understand that?

PS. From Edward Dolnick’s “The Forger’s Spell” I extract that the psychologist Leon Festinger once marveled: “A man with conviction is a hard man to change. Tell him you disagree and he turns away. Show him facts or figures and he questions your sources. Appeal to logic and he fails to see your point”. Does this apply to me, or to the bank regulators and Financial Times journalists, or to all of us?

Americans who sing about their “Home of the brave”, are clueless about what their bank regulators are up to

Sir in “A superpower at risk of slippage” October 26 you so correctly write “History is littered with solid objects – and risk-less assets – that have melted into thin air.” And yet, you keep mum about the fact that your own banks are allowed to hold exposures against minimal capital, sometimes even zero, only because these assets are perceived, by fallible humans, as “risk-less assets”.

But, if anything puts a superpower at the risk of slippage, that is when a superpower starts fretting more about what it has than about what it can get. And that happens when for instance it accepts regulations that basically instruct their banks to stop financing the “risky” future and concentrate on refinancing the “safer” past. Like what is done by means of the Basel Committee’s and the Financial Stability Board silly capital requirements based on ex ante perceived risk.

God make us daring!

More than overzealous bank regulators, governments and we should fear dumb regulators.

Sir, what is that nonsense of “Let the regulators show their teeth” July 24. It is not the role of regulators to regulate by showing teeth, but to regulate in a smart way.

And when you write “British banks entered the recession short of capital, it is fair for them to be asked to shore up their balance sheets”, remember that only happened because regulators allowed for silly low capital requirements against any exposure ex ante perceived as absolutely safe, ignoring that it is precisely that type of exposure which, because of the size it usually takes, sets of a big crisis if ex post it turns out it was not that safe.

Of course the UK banks need more capital among other because some banks in some other countries are strengthening their capital ratios, and you would not like to be left with the weaklings.

But, if the government “fears overzealous regulators could put the recovery at risk” that would happen more as a consequence of the distortions produced by dumb regulators applying different capital requirements for different assets, based on ex ante perceived risks, than because of the overall capital requirements being too high or too low.