Do we also need the possibility of clawbacks or prison to concentrate the minds of bank regulators?

Sir, Harvey Clark Greisman, when discussing Gillian Tett’s “Clawbacks emerge as a vital weapon in finance”, September 30, argues: “The only penalty that will concentrate bankers’ minds is prison”, October 10.

And what about regulators? If ever submitted to public shaming, could that suffice? 

How do we keep them from doing such insane things as regulating banks before clearly defining the purpose of the banks? 

How do we keep them from imposing capital requirements in order to make banks safe without one single empirical study on what has caused major bank crises in the past?

How do we keep them foremost concerned with doing no harm?

How do we keep them from committing the list of horrendous mistakes contained in the following aide memoire?

@PerKurowski ©

How much should we claw-back from inept bank regulators who neglected their fiduciary responsibilities?G

Sir, Gillian Tett writes: “If bankers are going to defend their craft, let alone their high pay, they have to start truly sharing risks with shareholders and taxpayers…If clawbacks had been in place a decade ago, those scandals at Deutsche and Wells might never have erupted in the first place.” “Clawbacks emerge as a vital weapon in finance” September 30.

That applies to regulators too.

The Basel Committee neglected to define the purpose of the banks before regulating these and so came up with the risk weighted capital requirements for banks that have so distorted the allocation of bank credit to the real economy.

The Basel Committee also neglected to do the empirical studies to determine what cause bank crises and so placed much higher risk weights on what was perceived as safe, when actually all crises have resulted from unexpected events like natural disasters, illegal behavior like lending to affiliates, or excessive exposures to what was erroneously perceived as very safe.

The results? A banking crisis because of excessive exposures against too little capital to what was perceived, decreed or concocted as safe; and economic stagnation resulting from too little financing to the “risky” SMEs and entrepreneurs.

Is that not an amazing fiduciary negligence that merits, as a minimum minimorum. some claw-backs?

PS. And all those journalists and famed columnists that so blithely ignored the regulatory faults when denounced over and over again, should they go scot-free?

@PerKurowski ©

Sadly there is no way to clawback missed opportunities and misallocated resources

Sir, Patrick Jenkins argues a lot on the benefit of “clawback” in “The time has come to rehabilitate bankers’ bonuses” March 5. And of course, intelligent “clawback” of bonuses is much welcomed, especially for the shareholders who otherwise need to foot the full bill.

But, for the society as a whole, much much worse than unjustified paid bankers’ bonuses, are all those missed opportunities and misallocated resources which have resulted from the current bank regulators having concocted dumb capital requirements for banks which favor “The Infallible”, those already favored, and thereby additionally discriminate against “The Risky”.

And sadly, there is no way to “clawback” that. It is even worse, in this case the regulators do not even want to recognize their mistake, and instead are set on carrying on business as usual.