Free Greece from regulatory shackles that make banks finance more the safer past & present than the riskier tomorrow

Sir, when commenting on the tensions between a “eurogroup” of ministers and the IMF about how to solve the problem called Greece you, as you should, clearly argue in favor of some additional relief of that debt “overhang that can only depress confidence”, “The IMF should stay in the Greek rescue squad”. October 12.

The problem though is that even if all Greece’s debt was condoned, but bank regulations stayed the same, that nation would just repeat its and most other countries’ recent mistakes.

Sir, nothing expresses a more depressed confidence in tomorrow as Basel’s risk-weighted capital requirements for banks. If Greece, and all the rest, is not freed from it, its banks have no chance of allocating credit so as to achieve a sturdy and sustainable growth. And besides if such growth does not happen, the banks’ own stability is also endangered.

That Europe, IMF, and the rest of regulators, do still seem to be unaware of what nasty effects their current bank regulations produce, is just amazing. Or perhaps they are all aware of it, but, with a little help from their friends, like FT, are just circling their wagons in order to defend their little mutual admiration club of technocrats.

There should be claw-back clauses for failed regulators and blind journalists (and editors) too!

@PerKurowski ©

If banks in Greece are prohibited to hold foreign assets against less equity than holding Greek assets… is it ideology?

Sir, you describe a list of “pragmatic concessions” issued by Greece’s Syriza government to the eurogroup of finance ministers as “wrapped in the language of ideology”, “Syriza and Europe must be patient and pragmatic” March 1.

I have a question. If I was a finance minister in Greece, and required all banks that operated in Greece to hold the same equity against all assets, because that made sense to Greece, would that be an ideological stance?

Because as is, to allow banks operating in Greece to hold less equity against assets located outside of Greece, only because these asset are perceived as safer from a credit point of view… sound to me like outright ideological nonsense.