Our need to concern ourselves about the use of our personal data goes much beyond what’s in the Facebook/Cambridge Analytica entanglement

Sir, I refer to Hannah Kuchler’s “The anti-social network” March 24 and all other reports that will pop up on the Facebook/Cambridge Analytica entanglement.

For a starter, why should we be so concerned with Facebook losing control of data to third-party developers, when Facebook has all that data and even more on us, and on which we have handed over the control to Facebook?

Then, if there is something that should be of the greatest concern to us citizens, that is the possibility of Facebook and similar teaming up with governments in “Big Brother is watching you, and makes profits on you all” joint ventures.

In fact that seems already to be happening as Brussels wants in on the ad-revenues.

I pray there are no secret negotiations going on between Venezuela’s Maduro and Facebook’s Mark Zuckerberg. I mean if Goldman Sachs’ Lloyd Blankfein could finance such an odious human rights violating regime, without any important social sanctioning of him, why should not Zuckerberg thinks about selling data to it too?

Sir, it is clear that we have need for independent entities such as central banks, then an ironclad independency of an Agency Supervising Our Personal Data Usage, seems to me to be the mother of the needs for independency.

Down with all "Big Brothers are watching you". And it does not matter whether these are Public, Private or PPPs (Public Private Partnerships)!

Of course the usage of our data supervisory agency must be managed by wise and common sense possessing individuals and not by dummies like those of the Basel Committee on Banking Supervision who are so not only convinced that what is perceived as risky is more dangerous to our bank system than what is perceived as safe, but also so easily manipulated by the banks.

PS. I forgot the first tweet I made on this, namely: How do we know this is not all fake news created in order to provide some polarization profiteers with new marketing material?

PS. Sir, I could be adding new comments to this post… so you might want to come back now and again to have a look at what’s in it.

PS. We must keep the ambulance chasers and the redistribution profiteers out of the business of fining the social media. All fines should go to fund a citizen’s Universal Basic Income

@PerKurowski

Require banks to hold capital against the unexpected, making sure those not able to manage perceived risks fail, fast

Sir, Nobuchika Mori, commissioner of Japan’s Financial Services Agency writes: “Regulators have made the global financial system more resilient by major regulatory reforms. Banks now have much bigger capital and liquidity buffers. Resolution frameworks have been strengthened. Derivatives markets are being made safer, while toxic forms of shadow banking have been detoxified.” “A holistic approach to future-proofing the financial system” May 26.

Holy moly! How come bank regulators have not been nominated for a Nobel Prize? I mean, if Bob Dylan and Juan Manuel Santos could each get one, and if what the author says is true, these also sound to be worthy one or two.

But no! Nobuchika Mori then goes on describing some pending issues that would not make them worthy of a prize, on the contrary, more worthy of being sacked.

He writes: “It is possible that funds are not being allocated in ways that foster economic growth. Credit should be provided in ways that enhance productivity, revitalise industry, foster innovations and create new businesses.”

Indeed! But should not the purpose of the banks have been defined before regulating these?

He writes: “We need supervision to establish whether regulation offers perverse incentives to banks to accumulate excessive risks.”

More than supervision what is needed are regulators that understand that with their current capital requirements, banks will accumulate too large exposures against what is ex ante perceived as safe (but that ex post could be risky) and too little exposures to what is perceived as risky, like those “small and medium-size enterprises” those who according to the author could “help to revitalise local communities”

“An Explanatory Note on the Basel II IRB (internal ratings-based) Risk Weight Functions” expresses: 

“The model [is] portfolio invariant and so the capital required for any given loan does only depend on the risk of that loan and must not depend on the portfolio it is added to.”

The explicit reason for that mindboggling simplification was: 

“This characteristic has been deemed vital in order to make the new IRB framework applicable to a wider range of countries and institutions. Taking into account the actual portfolio composition when determining capital for each loan - as is done in more advanced credit portfolio models - would have been a too complex task for most banks and supervisors alike.”

But here Nobuchika Mori wants the supervisors to take on even a more active and complex role. That would not be helpful. That implies assigning the supervisors too much capability and, explicitly, too much power.

Much better it is to get rid of all risk weighting setting a reasonable leverage ratio, like 10% capital for all assets (sovereigns included), to cover in part for what is unexpected… all in the knowledge that the faster banks that cannot manage perceived risks fail, the better for all.

The Questions!

@PerKurowski