The risks never gone are now coming back with vengeance.
Sir Roger Altman in “Modern history greatest regulatory failure” September 18 ascribes this to the extraordinary leverage that some institutions took on and the development of a huge financial system outside the normal banking network.
He is right in the secondary causes but the origin of the whole leisured and blasé attitude to risks of the market that allowed for leverage to happen had its origin in the crazy notion that you can have some credit rating agencies correctly measuring risks without creating systemic risks; and the push for a system outside of banking was a direct result of the regulatory arbitrage that arose when the regulators imposed on banks minimum capital requirements based on risks.
Everyone were busy congratulating each other they had beat the risks and so everyone relaxed… and there you have it, the risks never gone are now coming back with vengeance.
He is right in the secondary causes but the origin of the whole leisured and blasé attitude to risks of the market that allowed for leverage to happen had its origin in the crazy notion that you can have some credit rating agencies correctly measuring risks without creating systemic risks; and the push for a system outside of banking was a direct result of the regulatory arbitrage that arose when the regulators imposed on banks minimum capital requirements based on risks.
Everyone were busy congratulating each other they had beat the risks and so everyone relaxed… and there you have it, the risks never gone are now coming back with vengeance.
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