September 14, 2011

Mr. Regulator, tear down this Basel wall

Sir, John Kay writes “Without ringfencing it will soon be a case of ‘here we go again’, September 14. May I suggest that instead of thinking about ringfencing, we should be thinking more about tearing down walls. 

Basel bank regulations built a wall that, with its capital requirements, arbitrarily discriminates in favor of what is dangerously perceived as “not-risky” and against what wimpy regulators consider the dangerous “risky”. 

This wall drove the world to a crisis, by means of generating excessive bank exposures to what was ex-ante perceived as “not-risky”, and is stopping the world from getting out of it, by making it harder to enlist the help of the “risky”, the small businesses and entrepreneurs. 

Therefore, for the benefit of the future, Mr. Regulator, tear down this Basel wall!