September 01, 2012

Yes, Basel III has to be thrown out the window, in its entirety, current bank regulators too

Sir, Brooke Masters, September 1, reports that Andrew Haldane, at Jackson Hole, made a “Call for simpler bank oversight” which “would require an about-turn from the regulatory community from the path followed for the better part of the past 50 years”. 

As you must know by now, even though you quite diligently have set your mind on ignoring it, I have for almost a decade held that bank regulators are not just some few degrees wrong, but 180 degrees wrong, and so I cannot but agree with Haldane. 

His argument is in line with that of mine that holds that, by accepting to engage banks through complex regulations, the regulators have acted less as regulators and more as risk-managers… which does not make any sense, since a regulator’s prime responsibility is to prepare itself for when risk-management fails. 

But there are of course many more reasons to throw Basel III, and the current Basel Committee regulators too, out of the window. Unfortunately, no matter how wrong one can prove them to be, getting rid of it and them is no easy task, especially when even a Financial Times want to treat them with kid gloves.