Current bank regulations would have prevented no previous crises, much the contrary.

Sir, John Kay writes: “we devise rules that would have prevented the latest crisis from have happening if they had existed a decade earlier”, “Leveson should have learnt the lesson of the banking crisis”, January 5.

That might be applicable to many crisis, but not to the one that began in 2007-08. Had the regulators really looked at all the earlier crises when they designed Basel II in 2003-04, they would have ascertained that all the crises resulted from excessive exposures to assets that were ex-ante perceived as absolutely safe, but that ex-post turned out to be risky. And had they considered that they would never ever have designed capital requirements for banks which are much lower when the perceived risk is low than when it is higher, but could perhaps even have contemplated capital requirements that went 180° in the opposite direction.

John Kay is correct though when he writes: “Independence should mean regulators are free to take day to day decisions free of political interference, not that regulators are free to define policy directions for themselves.” But, the best way to ascertain all that, is for the purpose of the regulations, in this case the purpose of the banks, to be clearly defined between all parties concerned, including borrowers, and, about that there is for instance not a single word in the whole Basel framework.

I do not know if Paul Tucker is or not the right man for the Old Lady, but he sure does not seem the right man for Britain.

Sir, you hold that Paul Tucker is “The right man for the Old Lady”, November 16. And though I do not know much about the Old Lady I must disagree, because the last thing I feel that Britain needs at this moment, is someone who quite recently opined that “Stability comes before the good things in life”. 

It was stability searching nannies, with their silly and uncontrolled risk adverseness that made the banks to excessively increase their exposures to what was considered absolutely not risky, “The Infallible” and to doing so, not only causing many safe havens to become dangerously overpopulated but also stopping “The Risky”, like small businesses and entrepreneurs, from having access to bank credit on equal terms. 

You suggest that “the new governor should make room for intellectual free spirits, such as Andrew Haldane”. Though in some ways I have not felt Mr. Haldane yet to be free enough, I wonder why someone like him could not directly replace Sir Mervyn King.

The correlation between the problem loans of banks and the lower capital requirements is 1

Sir bank regulators caused the current financial crisis by allowing banks to hold very little capital, for what was ex-ante officially perceived as not risky, and are deepening it by requiring them to hold more capital when there is none to be found.

Victor Mallet and Miles Johnson should really have titled their article “The bank that broke Spain” June 22 as “The Regulators that broke the bank that broke Spain” For how long will FT turn a blind eye to the sad fact that the Western World is drowning in seriously undercapitalized Bankias?

The Great Bank Retrenchment to the Last Safe Haven is on full speed ahead and so all our banks seem doomed to end up trampled to death on the shores of the Bundesbank and US Treasury.

If you are short on capital you naturally go where less of it is needed.

Sir, John Plender in “Why the rush by UK banks into property needs watching” April 20, asks “Why the enthusiasm for an asset class that has been a graveyard for lenders in countless busts?” The simple answer is that going there they are allowed to have less capital than when lending to those officially considered more risky, like the small businesses and entrepreneurs.

Plender also quotes Adrian Blundell-Wignall of the OECD arguing “that the Basel risk weighting formulas are based on a mathematical model that does not penalize portfolio concentration”. That is indeed correct, but much more important is to notice that those risk-weights encouraged excessive concentrations… and even the safest of havens can become overcrowded.

What the “mathematical model” (big words to describe nonsense) used by Basel calculating the risk-weights left out was the fact that the banks were already looking at credit ratings when setting their risk premiums and corresponding interest rates. It might seem a small mistake but it has created thousands times more losses than when a technical confusion derived from simultaneously applying metric and English measures made the Mars Climate Orbiter spaceship miss Mars.

Though the outlook is for hurricanes you have not yet seen the roofs flying, just yet.

Sir Martin Wolf, as an economist, stubbornly refuses to even consider those financial regulations, or may I dare to say global capital controls, that directed the worlds capital flows so excessively towards creating excessive debts in areas that were officially perceived as not risky, like the US, UK, Greece and the triple-A rated securities in this world. “Faltering in a stormy sea of debt” April 20. Since what the regulators are currently doing is trying to correct for that mistake, instead of correcting the mistake, we should expect a serious case of regulatory overmedication to also strengthen the storms that await us.

Let me take the opportunity to comment on Standard & Poor’s recent grim outlook for the US debt. Given that the US can always by printing repay its debt in nominal terms that must mean that S&P is, I believe for the first time, considering the possibility of collecting on loans in real terms.

How long are regulators allowed to persist with their foolishness?

Sir I refer to so many news, about when a downgrading of credit ratings cause much havoc, like for instance Nicole Bullock´s report on April 19 “Muni bond risks grow after S&P’s DeKalb cut”.

It is high time to ask our regulators some basic questions like when they believe banks incur in the risk of lending, when they make a loan or when the borrower is down-rated. Of course, when they make the loan!

And so I ask how long should we allow the regulators to insist on a foolish system with retroactive corrections, based on credit ratings, and which makes the difficulties encountered with a client that turned out to be worse than he was originally rated even more difficult, and not a system of upfront capital requirements independent of ratings.

If Solvency II would be something like Basel II

Sir, in “EU reform plan alarms insurers” April 5, representatives of insurance companies express some reservations about the regulatory package known as Solvency II coming in force at the start of 2013... and I wonder whether some of the insured would have reasons to be concerned too.

I mean if Solvency II for the insurance companies follows the principles of the Basel II applied to banks, then the capital requirements for insurance companies for insuring those perceived as less healthy will be higher than those required when insuring those perceived as much healthier, independently from the fact that insurance companies already charge higher premiums to the first group.

Has anyone heard about some health rating agencies positioning themselves for business?