If global bank regulations are as bad as the current, then a fragmented system is better.

Sir, John Plender concludes his “StanChart is a reminder of banking’s insatiable greed”, August 10, with “competition between financial centres is a trivial issue when compared with the wider global threat to jobs and growth. The stakes in this unfolding saga are uncomfortably high.” And he is absolutely right. 

But Plender also refers to the “growing risk that the regulatory response to scandals could, as a byproduct, lead to the fragmentation of the global financial system”, and there I must remind him that a global financial system subject to the wrong global financial regulations is worse than a fragmented system, where at least perhaps some places could do it better. 

For instance a system where a German bank was required to hold 8 percent in capital when lending to a German small business or entrepreneur, only on account of that being perceived as “risky”, while at the same time being able to lend to Greece holding only 1.6 percent in capital because Greece was officially perceived as “not risky”, are not the kind of regulations I would like to see applied globally.

Since Basel has become too one minded to regulate we must break up the regulator too

Sir not only do I agree with Philip Augar and John McFall in that “To fix the system we must break up the banks” September 11, but perhaps we need to break up the regulators too…because Basel has become too one minded to regulate. (It is probably not comme il faut to quote from another newspaper, but it is such a small paper so here I go.)
In February 2000 in the Daily Journal of Caracas, Venezuela, in an article titled “Kafka and global banking” I wrote:
A diminished diversification of risk. No matter what bank regulators can invent to guarantee the diversification of risks in each individual bank, there is no doubt in my mind that less institutions means less baskets in which to put one’s eggs. One often reads that during the first four years of the 1930’s decade in the U.S.A., a total of 9,000 banks went under. One can easily ask what would have happened to the U.S.A. if there had been only one big bank at that time.
The risk of regulation. In the past there were many countries and many forms of regulation. Today, in Basel, norms and regulation are haughtily put into place that transcend borders and are applicable worldwide without considering that the after effects of any mistake could be explosive.
Excessive similitude. By trying to insure that all banks adopt the same rules and norms as established in Basel, we are also pushing them into coming ever closer and closer to each other in their way of conducting business. Unfortunately, however, nor are all countries the same, nor are all economies alike. This means that some countries and economies necessarily will end up with banking systems that do not adapt to their individual needs.
Sir and I hold that I am still right.