It behooves EU technocrats to find out what Europeans want and do not want to come out of Brexit.

Sir, Karin Kneissl, even by daring to explain some historical reasons for why Britain might not really belong in EU, makes a firm and clear call, to all the parties directly involved in the Brexit negotiations, to come back to their common senses. “A pragmatic approach to Brexit will pay off for both sides” August 10.

Hopefully it will give those many in Britain (including some in FT) who seem to want Brexit to fail, big, so that they can say their “We told you so”, some reason to recapacitate. Of course many of them, just like many Trump enemies in the US, are beyond the point where they would be able to do so.

If Karin Kneissl wants to help even more she should give Mr. Negotiator Barnier a call, and remind him that it behooves him, and all other EU technocrats, to find out what Europeans want and do not want to come out of Brexit. That this has not been done is sincerely amazing and only points to way too much besserwisser arrogance playing a role.

And Sir, if Brexit fails big, it is not certain at all that the loudest protesters would be British. Among Europeans, Britain counts with much more sympathy than what all commissioners, whose egos were hurt with Brexit, think it has. A French finding it harder to visit London is just as likely to be upset than a Brit finding it harder to visit Paris… perhaps even more “Mon Dieu, que dirait de Gaulle?”

@PerKurowski

Credit-risk weighted capital requirements for banks makes efficient capital allocation, a mission really impossible

Sir, John Kay writes: “Efficient capital allocation requires above all the knowledge and experience to asses the quality of underlying assets, and the capabilities of those who manage them. Yet the ability most valued in the finance sector in the first decade of the 21st century was a keen appreciation of asset markets themselves. The deployment of such abilities by people with an exaggerated idea of the relevance of these skills, and an overblown sense of their own competence, plunged the global economy into the worst financial crisis since the Great Depression.” “The clever marketeers who crashed the economy”, September 2.

That is true but it is absolutely not the whole truth. Those clever markeeters would not have been able to get as far as they got, meaning to leverage the banks as much as they did, without the intimate cooperation provided by regulators. And these have even just as much, or perhaps even more overblown sense of their competence.

The bank manager John Kay remember from his schoolboy days in the 60s, and “who would base his lending decision as much on his local knowledge and the character of the borrower as on figures”, did not have to deal with credit-risk weighted bank capital requirements.

Sir, no matter how much “knowledge and experience to asses the quality of underlying assets” bankers could have, those capital regulations make any “efficient capital allocation” a mission really impossible.

Sir, dare an answer: Where would we be if our forefathers’ banks had been subject to credit-risk weighted capital requirements?

PS. Behind too many overblown senses of competence, hide too many uncritical journalists in awe.

@PerKurowski

Regulators did not trust the market and imposed their own judgments on the banks.

Sir, having Lunch with FT´s Edward Luce, April 6, Michael Sandel, when discussing his book “What Money Can’t Buy: The Moral Limits of Markets” says:“Right at the heart of the market is the idea that if two consenting adults have a deal, there is no need for others to figure out whether they valued that exchange properly. It’s the non-judgmental appeal of market reasoning that I think helped deepen its hold on public life and made it more than just an economic tool; it has elevated it into an unspoken public philosophy of everything”.

"Everything"? sorry, that is not true. Had it been, we would most certainly not be having the current crisis. You see the bank regulators, they did not trust the deals the consenting adult of bankers and borrowers did, and so they imposed their own judgments.

To make sure there was not too much risk-taking going on, they designed capital requirements which allow banks to make a much higher expected risk-adjusted return on equity when doing business with “The Infallible”, than when engaging with “The Risky”.

And of course, under such distorted conditions, banks are overdosing on sovereigns, AAA rated constructions and what else is officially considered safe-haven, and lending too little to “risky” small businesses and entrepreneurs the real forces of the real economy.

Edward Luce most splendidly comments: “There is a thin line between promoting virtue and practicing tyranny.” And I would say that line might be crossed by even trying to define what the virtues should be.

Sir, the arrogance of bank regulators believing they could substitute for the market is just unbelievable. And Sir, excuse me for saying it, but the foolishness of so many, including FT, to believe they can, is just astonishing.