December 07, 2012

FT, John Plender, it was FIVE years ago that I told you “Simplicity in banking should always take precedence”

Sir, John Plender writes that Deutsche Bank’s net equity in 2007 amounted to just under 2 percent of total asset, meaning an over 50 to 1 leverage, while “its tier one core capital under the Basel weighted capital was 8.6 percent” which implies a lower than 12 to 1 leverage, “Simplicity in banking should always take precedence” December 7. 

As a consequence of not reading up sufficiently on what Basel II really was about you were duped. On my TeawithFT blog you can find hundreds of letters that tried to explain the Basel distorted bank leverages to you. You ignored these and even kept on again and again comparing the Basel risk-weighted bank leverages with the historic un-weighted bank leverages. 

And this amounts to a quite sloppy journalistic job and a general lack of questioning capacity in FT. 

And now on “simplicity” 

On December 19, 2007, John Plender, in “Investors pray for acts of God but even they come at a cost”, asked, what is the right level of capital for today´s financial world? 

“Since it is in fact impossible to calculate the right capital then the best thing would be to be humble about it and require one single capital requirement on assets, instead of arrogantly trying to outwit the market as the regulators did when they created their current minimum capital requirements that differentiates based on how risks are perceived, primarily by the credit rating agencies. 

It is when the regulators themselves start acting like God that they really set us up for the big systemic disasters.” 

Does FT really have the "without fear and without favour" in it itself to recognize those who have been right all the time, even though these do not belong to FT’s own crony intimate circle?