September 08, 2012

Dumb bank regulatory nannies… talk about a real hazard!

Sir, James Mackintosh in “ECB bazooka faces peripheral tests” writes about ECB’s recent “grand plan to save the euro” and of the moral hazard “that Spain or another beneficiary fritters away the savings from cheaper financing in order to please voters”. 

The hazard of that moral hazard is relatively small when compared to the hazard of having banks regulated by nannies who do not understand what they are doing. 

When a regulator allows a bank to have less capital, only because a borrower is perceived as “not-risky”, he is effectively, de facto, discriminating against those perceived as “risky”, like the small business and entrepreneurs. And, discriminating against the access to bank credit of these so needed “risky” risk-takers is, more or less, a death sentence to our economies.