August 10, 2012

Bank regulators, stop protecting the vested interest of the “not-risky”, which discriminates against the “risky”.

Sir, James Wilson and Giulia Segreti reports that “ECB calls for ‘courageous’ action to tackle‘vested interests’” and of “the need to bring down labour costs, boost productivity and improve the business climate”, August 10. 

Absolutely! But why does not ECB ask regulators to stop protecting the vested interest of those perceived as “not-risky” with their capital requirements for banks based on perceived risk. These regulations are precisely the main cause for why the report also states that “Coldiretti, the Italian agricultural association, estimates that 60 per cent of companies in the sector risk being starved of credit as they face interest rates that are 30 per cent higher than the average of other sectors” 

Really, bank regulators who allow banks to lend without any capital to supposedly infallible sovereigns and very little capital to what private is AAA rated while at the same time requires the banks to hold much more capital when lending to the “risky”, like small businesses and entrepreneurs, should be ashamed of themselves. They have no idea of what banking is all about. They are guilty of causing “L’economia castrata” and which threatens to bring theWestern world to its knees