Aren’t all nations, one way or another, tarred with a similar brush of nationalism?

Sir, Harriet Agnew and David Keohane report that, on the centenary of the end of the First World War, Emmanuel Macron railed against nationalism as a “betrayal of patriotism”, in an implicit rebuke to his US counterpart. “Macron attacks nationalism in Armistice Day rebuke to Trump” November 12.

Macron said: “By saying ‘Our interests first. Who cares about the others?’ we erase what a nation holds dearest, what gives it life, what makes it great, and what is essential: its moral values.” Is that not beautiful? Of course it is!

My problem though is that precisely these days I have been writing that the ending of the First World War, and the Versailles treaty, should provide an opportunity to reflect on the armistice conditions that are imposed on sovereigns, when they have to capitulate because of excessive loads of public debts. This especially because it is usually not only the defeated sovereign’s fault. 

If we look behind most odious debts, we will find surely find odious credits. In the case of eurozone sovereigns, like Greece, odiously dumb regulations too. Assigning a zero risk, as the European Commission did to a nation that is much indebted in a currency like the euro, which is not really its domestic (printable) currency, made absolutely no sense. That meant for instance that German and French banks could lend to Greece against no capital at all, and so, naturally, these banks could not resist the temptation of offering Greece too much credit, and Greece could not resist the temptation of taking on too much debt.

But what happened? The recent armistice conditions imposed by EU authorities required Greece to take on debt, much of it in order to repay German and French banks, leaving it with about a €345 billion debt, more than €30.000 per each Greek, in a currency that as I mentioned is de facto not their own. 

Sir, so I ask is that not just another Carthaginian peace? Viewed this way, no matter how right what Macron preaches is, does he really have the right to throw the first stone on “moral values”? Aren’t all nations, one way or another, tarred with a similar brush of nationalism?

Sir, this is no minor issue. Since Italy would most probably not walk the plank like Greece, the future of the Euro, and of the European Union is at stake… and that is something that those who might rightly defend the Remain against the Brexit, should at least out of pure precaution consider.

@PerKurowski

Risks, even if perfectly perceived, can lead to very wrong actions if excessively considered

Sir you write: “as the expansion of world trade has slowed over the past few years, familiar warnings about the political risks to growth have re-emerged… The International Monetary Fund warned this week that political risk was one of the biggest threats to the world economy… But unless and until these political risks materialise, there is no need to panic about trade, and the best way of keeping it expanding is simply to encourage overall economic growth” “The IMF sends a signal on political risk realities” October 6.

That is entirely correct Sir. Risks, even if perfectly perceived, can lead to very wrong actions, if excessively considered. But Sir, why do you refuse to apply that kind of argument to current bank regulations?

There we had the banks perceiving credit risk, some doing it well an others less so, and then deciding on what amount of exposure they wanted, and what interest rate, risk premium, they would charge. But NO! that was deemed insufficient by the meddling and nervously nannying technocrats in the Basel Committee, and so they invented that they should also react to the same risk perception, and set the capital a bank should have against an asset accordingly. And so credit risk (or credit safety too) got to be excessively considered, which has completely distorted the allocation of bank credit to the real economy.

But not a word is spoken about this; probably because it is all backed by some very hard to understand risk management concepts that few dare to discuss. And so now we have for instance ended up with the absurdity of having what can really grow into dangerous excessive bank exposures, like the AAA to AA rated, being risk-weighted at 20%, while the totally innocuous below BB-rated get a 150% risk weight. Sheer lunacy!

So now, ironically, in order for bank credit to be efficiently allocated to the real economy; and not endanger the banking system’s stability, the perceived risks need to be wrong. What is “safe” must be perceived riskier and what is “risky” must be perceived safer. 

PS. An aide mémoire on the loony risk weighted capital requirements

@PerKurowski ©

A “Bye-bye-Basel” that frees Britain from dangerous credit risk aversion, would more than compensate Brexit costs.

Sir, Wolfgang Münchau describes a much constructive position with respect to the possibility of a Brexit. "In the event of Brexit, let Britain go in peace", June 13.

With respect to the long-term consequences of a Brexit, Münchau writes: “There are, of course, a number of specific negative economic effects, but also offsetting ones… Economic theory tells us that the wealth of a country ultimately depends on its skills, resources, and the quality of its policies. It is hard to see how Brexit would change that”

If Brexit would allow Britain to also wave goodbye to those stupidly dangerous credit risk adverse capital requirements for banks imposed by the Basel Committee… then Britain could also recover much of that go get it spirit that once made it an Empire.

“Stupidly dangerous”? Yes! First it pushes banks to create excessive exposures to what is ex ante perceived as safe, precisely the stuff major bank crisis are made of; and second it hinder banks from lending sufficiently to “risky” SMEs and entrepreneurs, precisely what makes an economy stall and fall.

@PerKurowski ©

Pity the Basel Committee’s small leverage ratio; it sure has to carry a lot of risks on its back.

Sir, with interest rates and size of exposure the expected credit risk is the risk most cleared for by banks. Yet bank regulators also wanted to clear for it, and imposed their expected credit-risk weighted capital requirements. That left out of consideration, at least until Basel III, all other risks, like for instance that of cyber attacks to which Gillian Tett refers to in “Hackers target the weakest links in the financial chain”. May 20.

I say “until Basel III”, because now banks are by force of a leverage ratio, to hold at least 3% of capital against all exposures to cover for any risk.

But the Financial Stability Board has also “Task Force on Climate-related Financial Disclosures” which reminds us of risks from climate change.

And then there are the risks of demographic changes; the risk that the economies do not react to stimulus; the risks that credit risks have not been correctly perceived; the risk of war; the risk of epidemics, negative interest rates, deflation… and a never-ending list of risks of expected or unexpected losses. 

And you know I have repeatedly called for banks to also hold some capital against the risk regulators have no idea about what they’re doing, a risk that has morphed into a frightening reality.

But what’s the enticement for banks to cover for these types of risks when they can leverage as much as they currently do? Very little… in the same vein that the bonuses you can pay out to bank managers, when little bank capital is required, can be very big.

What do I propose? The abandonment of all dumb credit risk weighted capital requirements, and move towards a leverage ratio of 8 to 12%. That should increase the importance of the shareholders vis-à-vis management. And that should help to generate more interest among shareholders into making sure better risk avoidance or risk preparedness takes place.

The process of implementing those changes must though be very carefully designed, so as not to worsen the current capital scarcity driven bank credit austerity.

PS. The fact Basel Committee argued that “a simple leverage ratio framework is critical and complementary to the risk-based capital framework” was already a confession of not knowing what they were doing, but that notitia criminis was foolishly ignored. 

@PerKurowski ©

The 1988 Basel Accord decided on these risk weights: sovereign 0% and citizens 100%... and so bye, bye liberalism!

Sir, Tony Barber writes that “Illiberalism takes root in Europe’s fertile centre” May 14.

Forget it! True liberalism has been long gone in Europe, and in most of the western world.

That is because liberalism is totally incompatible with regulations that hold that for the purposes of setting the capital requirements for banks, the sovereign has a zero percent risk weight while the citizen, he who gives the sovereign its strength, has a 100 percent risk weight… that is unless he is are rated below BB-, because then his risk weight is 150 percent.

And that dangerously dumb bit of regulation, with its so single minded nanny like credit-risk aversion; which have banks no longer financing the risky future but only refinancing the “safer” past, little by little saps the strength of the real economy… little by little creates a climate in which anything can happen.

Just for a starter it provided all the incentives for banks lending too much to Greece, but that is not even discussed, we can’t have ordinary citizens doubting technocrats… can we?

@PerKurowski ©

Credit risk adverse bank regulations impede monetary stimuli to have a sustainable effect on growth.

Sir, David Folkerts-Landau, when discussing ECB’s “massive programme of purchasing Eurozone sovereign debt”, negative interests and similar writes: “Future students of monetary policy will shake their heads in disbelief… this is not the time for slavishly following a doubtful economic dogma — it is the time for common sense. The longer the ECB persists with unconventional monetary policy, the greater the damage to the European project will be.” “The ECB should change course before it is too late” May 6.

Folkerts-Landau can be sure that future students of bank regulations will shake their heads in even greater disbelief. The distortions produce by unconventionally forcing banks to clear in their capital for credit risk, that risk that is anyhow the most cleared risk by bankers with their risk-premiums and size of exposures, is mindboggling.

It is precisely that distortion that impedes the monetary policy to work.

Bank capital is to be there for unexpected losses, and expected credit losses has nothing to do with the unexpected.

Any risk, if excessively considered, causes the wrong actions, even if perfectly perceived.

And the list of stupidities goes on and on.

@PerKurowski ©

How do you protect your portfolio from the technocratic populists and demagogues, like those of the Basel Committee?

Sir, Gillian Tett writes about populism, protection and regulations and tells us “Protect your portfolio from the populists” May 6.

And so I would ask her how could we protect our portfolio from the populism and demagoguery of our bank regulators, the Basel Committee and friends?

With the risk weighted capital requirements they tell us they are making our banks safer. Just the term “risk-weighted” transmits the notion that risks have now been cleared for.

I can see a regulator standing there on a balcony in Basel and, in the best Peron style, voice out loudly “We will risk-weigh, we will risk-weigh, we will risk-weigh your banks”. And I can also see the audience, including too many from FT, fascinated, in trance, responding with admiring and adoring “Viva!”

But the only thing that risk-weighing does, is to allow banks to earn higher risk adjusted returns on equity for assets perceived, decreed or concocted as safe than for assets perceived as risky. And so that means banks will now lend too much and at too low rates to the “safe” and too little at too high relative rates to the “risky”.

And it is all so sadly stupid, because if there is any risk already weighted for in banking that is the perceived credit risk.

And so if understanding that this distortion of the allocation of credit will be bad for the real economy, and that, sooner or later, some safe-havens will become dangerously overpopulated, what does one do?

Of course while technocrats with QEs, negative interests and similar insist on stimulating the economy, the value of many assets, those not included in inflation basket, will inflate. But, long term we know that without a sturdy real economy to back these assets up, these will also suffer.

Sir, no matter what Ms. Tett might think, I assure you it is probably much easier to protect your portfolio against ordinary populists, than against these the technocratic populists and demagogues.

"We will risk-weigh your banks!"

"Peron, Peron, Peron!"

@PerKurowski ©

Perceived credit risk is all about expected losses, while bank capital should be a buffer against unexpected losses.

Sir, John Kay writes that Warren Buffet, “In a revealing moment, when asked about the absence of conventional due diligence in his acquisition process; acknowledged that Berkshire had made bad acquisitions, but never one that could have been avoided by the kind of information that due diligence might have revealed.” “The Buffett model is widely worshipped but little copied” May 4.

Translate the above into bank regulations and it would mean: Banks could always lose but not because of the information a credit analysis might have revealed… much more dangerous than the expected, is the unexpected.

And that Sir is one of the many reasons why I believe current regulators are worse than fools. They defined the capital banks should be required to have, in order to confront unexpected losses, based on expected perceived credit risks. 

Please don’t tell me you think that is smart. In fact, the safer something is perceived, the greater is its potential to deliver huge unexpected losses. In fact, from this perspective, the safer something is perceived, the larger should the capital requirements for a bank be.

By the way let me make it clear that I am arguing this only to make a point, and I am not now suggesting we should distort the allocation of bank credit to the real economy in the other direction, favoring the risky.

Sir, if we are to distort, let us at least, as a minimum minimorum, do so with a purpose. For instance make the capital requirements for banks based on job creation and earth sustainability ratings.

PS. Here are plenty of reasons for why I believe the bank regulators in the Basel Committee are complete idiots… or something worse 

@PerKurowski ©

FT, why do you keep mum on the greatest austerity of all; the bank regulation ordered credit-risk-taking austerity?

Sir, you write: “Given huge disparities in the bloc, this is no time for more austerity” “A tentative upturn in the Eurozone economy” May 4.

And yet you keep mum about the most serious austerity of all; the risk-taking austerity imposed on banks by regulators and who have these not financing more the riskier future but mostly refinancing the for the rime being safer past.

And truly idiotic it is. Basel II assigned a risk weight of 20% to AAA rated assets and 150% to that rated below BB-. That is like a nanny telling the children to beware of the ugly and foul smelling and embrace more the nice looking gentlemen who offer them candy.

When you have seen how much stimulus has been thrown at the economy without it responding with any seemingly sustainable strength don’t you get curious about why? Or is it that you believe that as long as ECB’s Mario Draghi manages to hit an inflation target everything is going to be fine and dandy?

PS. Here again is an aide memoire on other regulatory stupidities.

@PerKurowski ©

If Britain had applied current bank regulations when it was developing, it might even have found itself below India

Sir, you write: “Even if one puts to one side doubts about India’s economic statistics, private investment remains weak. The government has rightly emphasized improved administration, faster decision-making and greater ease of doing business” and you quote Eswar Prasad of Cornell University ideas with “Markets for land and capital remain distorted. Several public sector banks are in dire shape. They need recapitalization and radical reform”, “Modi fails to exploit India’s great opportunity” April 4.

But again you fail to mention the fact that the Basel Committee’s credit risk weighted capital requirements for banks, which by favoring “the safe” disfavor “the risky”, is as anti-development and pro-inequality as can be.

Do you really think that allowing banks to earn higher expected risk adjusted returns on equity with “the safe” than with “the risky” is the way to go for a country that has not reached sufficient altitude climbing the mountain of development?

And it is not that these bank regulations keep you high up, they also impose a fast descent. With it Britain has expelled its spirited and adventurous risk taking and embraced the risk aversion of the scared.

Hello India, we, Britain, will soon catch up with you, while climbing down.

When the Bible says “But the meek will inherit the land and enjoy peace and prosperity” I am sure it was not to excessive risk-adverseness it was referring.

God make us daring!

@PerKurowski ©

There is risky bank lending and then there is "risky" bank lending

Martin Arnold and Laura Noonan quote Gonzalo Gortázar, chief executive at Spain’s Caixabank with “In a world of low or negative interest rates, that is a possible consequence. You could see banks taking more risk” “Europe bank chiefs fear risky lending from ultra-loose policy” March 22

Of course I cannot be absolutely sure but, when “banks taking more risk” is said, it most probably refers to larger exposures to something that because it is perceived, deemed or sold as safe, carries lower capital requirements.

What is perceived by regulators as risky, like loans to unrated corporations, SMEs or entrepreneurs, and which is risk weighted 100 percent or more, and so require banks to hold more capital, well that’s not the risks banks are taking, unfortunately for the economy.

It would be nice to see reporters digging up a little bit more about what risks is being referred to. In fact, I start any risk assessment by identifying what risk one cannot afford not to take... because that would be too risky.

PS. Another interesting detail is whether it is the ex-ante perceived risk or ex-post resulting risk that is being considered.

@PerKurowski ©

FT you’re now inconsistent! You’ve consistently ignored the nannying of banks by the nannies of the Basel Committee

Sir, you hold: “There is a case to intervene when people act in a way that harms those around them, or when it is a case of safeguarding children who cannot take an informed decision and may face bigger risks. If adults take risks with their own health, they should be made aware of the dangers and perhaps nudged into sense, but there is no case for coercion.” “The relentless march of the nanny state” March 18.

Indeed but why then do you keep mum when adult bankers, aware of the ex ante perceived credit risks, are coerced by regulators into considering those risks for a second time, by means of the risk weighted capital requirements for banks?

Can’t you understand that any risk, even if perfectly perceived, leads to the wrong actions, if excessively considered?

If you had two very concerned nannies watching over your children, you might accept them applying the average of their concerns, but never ever the sum of their concerns. Because you know that if they did that, your kids, embracing safety excessively, would grow up seriously disturbed. 

Equally, when now regulators’ risk aversion is added to bankers’ risk aversion, the result is a much disturbed banking system, that embraces excessively what is perceived or has been decreed as safe. Do you get it?

@PerKurowski ©

The by far best “collect as you go” pension plan, is built around loving kids and a healthy economy.

Sir, I refer to Michael Skapinker’s “Five possible scenarios for a ‘work till you drop’ world” March 10.

In my book “Voice and Noise” of 2006, on the issue of “Social Security in Real Terms” I wrote:

“In order for your savings and social security investments to be worth something when you need them, the real economy must be in a reasonable condition at the time of your selling your investments. When I hear the many discussions about the financial preparation needed to accommodate for the upcoming demographic changes, I find it truly amazing how little is being said about the economy in real terms.

Considering that there will be many fewer young ones to drive people around and shovel snow, much of today’s beautiful real estate might drop in value when the elderly start selling their houses to live close to a metro, hospital, and more reasonable weather conditions. So, before putting the money away in a private accumulation trust I think we need to rethink the whole retirement strategy.

Also we should never forget that historically, through all economic cycles, there is nothing so valuable in terms of personal social security as having many well-educated loving children to take care of you, and that you can’t, in real terms, beat that with any social security reform.”

I have the very loving very great kids, but I am still very concerned. Regulators concocted credit-risk weighted capital requirements for banks, and that is seriously distorting the allocation of credit to the real economy. If that mistake is not soon corrected, our economies are doomed to stall and fall.

How many kids of working age are not already living in the basements of their ‘work till you drop’ parents?

Sir, as I see it, we have no choice but to fire, immediately, the current bunch of dumb bank regulators.

@PerKurowski ©

If regulators insist on that any information gathered by banks must be doubly considered, that would be real dangerous.

Sir, Martin Wolf writes: “Finance is an information business. Indeed it already spends a higher share of its revenues on information technology than any other. It seems ripe for disruption by information technologies. Consider its three essential functions: payment; intermediation between savings and investment; and insurance. All these activities are information-intensive.” “Good news — fintech could disrupt finance” March 9.

Banks already perceived information about credit risks, and cleared for it with interest rates and the amounts of their exposures... and they were not doing that bad when it came to identify “the risky”, where they sometimes really failed, badly, was when they identified some as very safe.

But then came the regulators and told the banks they also had to consider the same perceived risks in the capital. And so banks did doubly stay away from the risky, and doubly fall into the traps tended by the false safes.

And so if all that information is going to be of value for the banks and for us, be sure to keep the regulators away from it.

Martin Wolf also quotes John Kay on that “parts of the financial sector today . . . demonstrate the lowest ethical standards of any legal industry”.

Not so. Compared to the ethical standards of regulators who abusing their powers distort the allocation of bank credit to the real economy; and by discriminating against the opportunities for fair access to bank credit of “The Risky” increase inequalities, one could argue that bankers are saints.

@PerKurowski ©

FT, when favoring bold action, why not begin by asking Mario Draghi and other bank regulators to resign?

Sir I refer to Claire Jones’ “Draghi reputation on line over recovery pledge” and your own “ECB’s greatest risk is the danger of doing nothing” March 8.

What can I say? Mario Draghi belongs to that bunch of bank regulators who believe that something rated below BB-, that which ranges from “highly speculative”, through “extremely speculative” and up to “default imminent”, is much more dangerous to banks than what is perceived as safe. Does that not say it all? As a regulator who with the risk weighted capital requirements for banks evidences that belief, he simply does not know what he is doing.

Now “ECB views its shift below zero interest rates as a complement to its quantitative easing program. Both policies, it says, force banks and investors to buy riskier assets to compensate for the costs of negative rates.” So Draghi now wants to “Force banks and investors to buy riskier assets”, while leaving intact the regulatory incentives against that? It is just so dumb!

You cite Draghi with “they warn us about the side-effects and risks of what we’re doing. But what I never hear them discuss is the risks of doing nothing.”, and you opine that “Not only are the risks of inaction greater than the risks of action, but that balance has also continued to tilt in favour of doing more.”

I fully agree, so why not begin with a general change of all bank regulators that had anything to do with that fatal systemic error in Basel I, II and III that no one discusses. They did the Eurozone in!

Welcome to the distorted new world of banking!

PS. I have definitely been in favor of doing more

@PerKurowski ©

The Basel Committee for Tropical Forest Supervision fumigates “risky” creatures and thereby kills its biodiversity.

Sir, Lawrence Summers discusses “the challenges currently facing macroeconomic policymakers in the US and the rest of the industrial world”. He expresses concern that policies could be behind the curve and believes central bankers’ communicate “a sense that there was relatively little left that they can do to strengthen growth or even to raise inflation” “A world stumped by stubbornly low inflation” March 7.

Oh no! There is much to do. Urgently!

Rain forests provide ecosystem services that play an important role in maintaining biological diversity, global climate regulation, disease control, pollination and much more.

What would we opine about forest guardians eradicating scrub-itch mites, ticks, spiders, scorpions, centipedes, wasps, hairy caterpillars, leeches, snakes, stinging tree, lawyer vine and other of the natural habitat, only on account that these are dangerous creatures?

Well that is exactly what bank regulators, central banks, have been doing to our real economies. With their credit risk weighted capital requirements for banks, they fight the SMEs and entrepreneurs only on account these are risky from a credit point of view.

And they are so fanatical that they do not warn bankers about hidden unexpected ex post dangers, they act even when bankers ex ante perceive the scorpions they know they should expect to be dangerous.

And of course our real economies, lacking more and more in diversity, stop to function as they should. 

And so we must urgently get rid of the current dumb bunch of forest guardians who, when trying to save banks from “The Risky”, are dangerously fumigating our real economies. The fact that even the central bankers communicate there is little they can do, is just another clear sign it is hight time for that.

@PerKurowski ©

Martin Wolf prefers government bureaucrat’s spending money that is not theirs over bankers making loans to SMEs

SMEs and entrepreneurs have less access to bank credit because banks are required to hold more of that scarce bank capital when lending to them, than when for instance lending to the sovereign or to members of the AAArisktocracy. And that is so because SMEs and entreprenuers have been deemed as risky by regulators, even when by being perceived ex ante as risky, de facto makes these borrowers safer for the bank system.

But Martin Wolf has clearly evidenced over the years he is not a slightest concerned with that distortion in the allocation of bank credit to the real economy, something which among other permits the supposedly "infallible" sovereign to have more than the usual preferential access to bank credit.

Now Wolf argues again, for the umpteenth time, that: “It is more important to create a robust financial sector. Yet pressure from the Treasury today seems to be to relax constraints. That may well be far riskier for the UK economy in the long run than modest fiscal deficits.” “Osborne’s desire to cut spending makes little sense” March 4.

I cannot but conclude that Martin Wolf, between bankers making loans to SMEs and entrepreneurs, or government bureaucrats spending money that is not theirs, much prefers the latter. I don’t!

@PerKurowski ©

If Trump wins that could be because some journalists, like Martin Wolf, withheld the truth of what has happened

Sir, Martin Wolf writes “The US is the greatest republic since Rome, the bastion of democracy, the guarantor of the liberal global order. It would be a global disaster if Mr Trump were to become president” “How great republics meet their end” March 2.

Absolutely, I agree 100 percent.

But, in Charles Goodhart’s “The Basel Committee on Banking Supervision: A History of the early years 1974-1997:” 2012, Cambridge Press Goodman (p.167) refers to Steven Solomon’s The Confidence Game (1995) we read:

"On September 2, 1986, the fine cutlery was laid once again at the Bank of England governor’s official residence at New Change… The occasion was an impromptu visit from Paul Volcker… When the Fed chairman sat down with Governor Robin Leigh-Pemberton and three senior BoE officials, the topic he raised was bank capital…

At dinner the governor’s hopes had been modest: to find areas of sufficient convergence of goals and regulatory concepts to achive separate but parallel upgrading moves…

Yet the momentum it galvanized… produced an unanticipated breakthrough of a fully articulated, common bank capital adequacy regime for the United States and United Kingdom. This in turn catalyzed one of the 1980’s most remarkable achievements – the first worldwide protocol on the definitions, framework, and minimum standards for the capital adequacy of international active banks…

They literally wiped the blackboard clean, then explored designing a new risk-weighted capital adequacy for both countries…

It included… a five-category framework of risk-weighted assets… It required banks to hold the full capital standard against against the highest-risk loans, half the standard for the second riskiest category, a quarter for the middle category, and so on to zero capital for assets, such as government securities, without meaningful risk of credit default.”

And that started the mother of all distortions to the allocation of bank credit to the real economy, that which got us into the economic low growth mess we’re all in.

And so when Martin Wolf now, with respect to Trump, worries that “An American ‘Caesarism has now become flesh” I have to ask him: Where were you Wolf when American and British regulators believed themselves to be Caesars and acted like such?

Martin Wolf, by defending the bank regulation's Caesars, you might very well be part of the reason why Donald Thrump can now aspire to be a Caesar. Sleep on that!

@PerKurowski ©

The limits to productivity growth are also defined by the willingness to take risks.

Sir, John Kay writes “The limits to productivity growth are set only by the limits to human inventiveness” “Prepare for the dawn of a second special century” March 2.

Wrong! Wrong! Wrong! These are also set by the willingness to pursue that human inventiveness no matter how risky it is.

And that is what our society has much stopped to do, primarily because our regulators gave our banks incentives to embrace what is perceived as safe and stay away from what is perceived as risky; and this even when (supposedly) according to Mark Twain “A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.”

Risktaking is the oxygen of development and a must for muscular and sustainable economic growth.

As is our banks do not finance any longer the riskier future, they just refinance the safer past.

@PerKurowski ©

Urgently fire those damn bank regulators who abandoned the young and ignored their needs for jobs and a future

Sir, I refer to the true tragical horrors described by Tobias Buck in “The fear and despair of Spain’s young jobseekers” March 2.

And I tell you again, though you will most probably ignore me again, that nothing as serious as that would have happened had not some few powerful and arrogant bank regulators, while trying to level the field for banks to compete, unleveled the real economies’ access to bank credit.

Read the chapters of “Capital adequacy and the Basel Accord of 1988” and “The BCBS and the social sciences” in Charles Goodhart’s “The Basel Committee on Banking Supervision: A History of the early years 1974-1997” 2012, Cambridge Press and you will understand. There is not one single reference to that how banks allocate credit to the real economy was of any concern whatsoever to regulators. And most probably it still is not.

Had they given that banks’ social purpose the slightest thought, they would have understood, unless too dumb, that their credit risk weighted capital requirements for banks impeded banks to adequately serve the economy.

Allowing banks to leverage equity differently based on “risk”, allows banks to earn higher risk adjusted return on equity on what is perceived or deemed to be“safe”, than on what is perceived as “risky”

So now “The safe” get too much credit on too lenient terms, while “The Risky” have no access to bank credit, that is unless they pay much higher risk adjusted premiums than they would ordinarily have to pay in an undistorted market.

Houses are safe so lend to that, but SMEs and entreprenuers the job creators are risky so cut them off!

Sovereigns are safe so lend to these, but the private sector is risky so, except for the AAArisktocracy, cut it off!

And so now our banks do not finance the “riskier” future they just refinance the “safer” past.

These regulators must be stopped! They are financial terrorists who threaten the future of our kids. And you FT must stop covering up for them.

“A ship in harbor is safe, but that is not what ships are for” John Augustus Shedd, 1850-1926

But not even ships are safe in a safe harbor if that harbor gets to be dangerously overpopulated.

@PerKurowski ©

Here a call in Spanish to the young to demand the risk taking they need

Here a letter in Spanish to the King asking for him to help the youth of Spain