June 30, 2010

When the going gets tough give the tough a chance!

Sir John Plender wrote “Fragile State of banks means recovery is still precarious” June 30 and few would debate him on that. Where he is wrong though is saying “that there is precious little left in the policymakers’ locker”.

At this moment what is most required, as a public regulatory policy, is to immediately reduce the capital requirements for banks on all those operations that just because they were deemed as more risky by the credit rating agencies, had to be backed up with higher capital requirements.

If we do not do that, we run the risks that while the banks are rebuilding the capital lost in AAA-land, they will crowd out completely those tough we so much need to get going now when the going is tough… and that would really be the end.