But Hank had company.
Sir John Gapper in “Too long in the spaceship, Hank” March 5, mentions that AIG´s “biggest money-spinner was regulatory arbitrage”. Exactly!
Before Basel banks and financial institutions always engaged in some regulatory arbitrage but it was mostly harmless. It was when the Basel Committee concocted a system of minimum capital requirements based on what they perceived as risk, and as measured by their risk sentries the credit rating agencies, that the real regulatory arbitrage business took off globally and turned into the extreme systemic danger it has proven itself to be.
And so if a Hank has been too long in a spaceship so has his fellow bank regulators.
Before Basel banks and financial institutions always engaged in some regulatory arbitrage but it was mostly harmless. It was when the Basel Committee concocted a system of minimum capital requirements based on what they perceived as risk, and as measured by their risk sentries the credit rating agencies, that the real regulatory arbitrage business took off globally and turned into the extreme systemic danger it has proven itself to be.
And so if a Hank has been too long in a spaceship so has his fellow bank regulators.
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