March 25, 2010

But it is also high time to stop rewarding perceived prudence.

Sir John Plender is very right in that “It is time to stop punishing prudence” by treating equity more fair when comparing to how debt is rewarded by the tax deductibility of interests, March 25.

But equally we also need refrain from rewarding perceived prudence, which happens when bank regulators, on top of all those benefits that already accrues to what is perceived as having lower risk, generously (and stupidly) layer on some minuscule capital requirements for banks any time they are involved with anything that can display a good credit rating.

As we have seen, and should have known, that undermines stability even more.