The regulators distrust of bankers is condemning our economies to stagnation

Sir, Tim Harford writes: Steve Knack, an economist at the World Bank with a long-standing interest in trust, once told me that if one takes a broad enough view of trust, “it would explain basically all the difference between the per capita income of the United States and Somalia”. In other words, without trust – and its vital complement, trustworthiness – there is no prospect of economic development.”, “The meaning of trust in the age of Airbnb” August 13.

And that would also mean that distrust must equally be dangerous for the development; like when regulators distrusted bankers to adjust for the risks they perceived by means of the size of exposure and interest rates, and told them to also adjust, for that same perceived risk, in the capital account.

And because any risk, even if perfectly perceived, causes the wrong action if excessively considered, our economies are suffering from an inefficient allocation of bank credit. Much too much credit for the safe havens that risk becoming dangerously overpopulated, and much too little for the exploration of the riskier bays populated by SMEs and entrepreneurs. This mother of distrusts, is a real tragedy!

@PerKurowski ©

I refuse to believe in the Basel Committee’s nonsense of government bureaucrats using bank credit better than SMEs

Sir, you hold that “Bankers need to demonstrate that they know right from wrong”, “Regulation alone will not restore faith in markets”, May 27.

If you set the weight for the capital (equity) requirements for banks when lending to government at 0%, and at 100% when lending to SMEs, that means that banks will lend more and at lower relative rates to the government than to the SMEs. And that means de facto you believe that government bureaucrats are more productive using bank credit than SMEs.

Well, I refuse to believe that. I believe that if you believe something like that, you are either extremely dumb or a communist.

And I do believe that good non-distortive regulation alone will go a long way to restoring faith in markets.

But if you in FT insist on keeping mum on the fact that regulators are distorting and are manipulating the bank credit markets… I must ask: Sir Financial Times, do you know right from wrong?

@PerKurowski