December 06, 2010

Government bureaucrats should not be the sole responsible for generating growth

Sir, Prof Jean Dermine in “Take regulations of bank capital one step at the time”, Letters December 6, lends his support to the Basel Committee´s decision to spread out the capital increases in Basel III over eight years. The problem though is that in the process there will still be many borrowers unduly penalized because lending to them generate larger capital requirements for banks than the lending to others. That is why I am so adamant that while we cannot afford lifting all capital requirements immediately, neither can we afford not lowering them for others.

At this particular moment billions of bank liquidity are already painted into the corner of the bank balances which does not require bank capital, namely the lending to high rated governments, and no matter how much everyone wants it to happen, that liquidity cannot be translated into loans to small businesses or entrepreneurs, because that would require bank capital for which there is currently no real appetite.

Let us allow small businesses and entrepreneurs to help us to get out of the doldrums, let us not place that burden on government bureaucrats alone.