Current bank regulations would have prevented no previous crises, much the contrary.

Sir, John Kay writes: “we devise rules that would have prevented the latest crisis from have happening if they had existed a decade earlier”, “Leveson should have learnt the lesson of the banking crisis”, January 5.

That might be applicable to many crisis, but not to the one that began in 2007-08. Had the regulators really looked at all the earlier crises when they designed Basel II in 2003-04, they would have ascertained that all the crises resulted from excessive exposures to assets that were ex-ante perceived as absolutely safe, but that ex-post turned out to be risky. And had they considered that they would never ever have designed capital requirements for banks which are much lower when the perceived risk is low than when it is higher, but could perhaps even have contemplated capital requirements that went 180° in the opposite direction.

John Kay is correct though when he writes: “Independence should mean regulators are free to take day to day decisions free of political interference, not that regulators are free to define policy directions for themselves.” But, the best way to ascertain all that, is for the purpose of the regulations, in this case the purpose of the banks, to be clearly defined between all parties concerned, including borrowers, and, about that there is for instance not a single word in the whole Basel framework.