Does FT dare to forward two simple questions to Mark Carney he might not dare answer?

Sir, I refer to Chris Giles “The five important questions that Carney must answer”, February 7.

As you very well know there are some questions that though they seem unimportant to you, are very important to me. Therefore I would very much appreciate it if, given a chance, “without fear”, you could forward to Mr. Carney the following two questions. Though quite simple and straightforward they seem strangely to have become, at least for those in charge of bank regulations, two completely unanswerable questions.

Question 1:

Current bank regulation’s rest on capital requirements for banks based on perceived risks.

What is perceived ex ante as absolutely safe, and therefore already benefits from lower interest rates, higher loans and more lenient terms¸ is benefited by causing lower capital requirements for banks, which produces higher risk adjusted returns on bank equity, leading to even lower interest rates, even higher loans and even more lenient terms.

What is perceived ex ante as risky, and which therefore already has to pay higher interest rates, receive smaller loans and under harsher terms¸ is discriminated against by means of causing higher capital requirements for banks, which produces lower risk-adjusted returns on bank equity, leading to having to pay even higher interest rates, receive even smaller loans and under even harsher terms.

Therefore Mr. Mark Carney, since you are the Chairman of The Financial Stability Board, I would like to ask: Do these capital requirements for banks not fundamentally distort economic signals and make it impossible for our banks to perform their vital social function of allocating economic resources in an efficient way.

Question 2:

As a result of the previously mentioned capital requirements, bank lending to what is perceived as an “infallible sovereign” causes virtually no need of bank capital. And this of course means that the “infallible sovereign” needs to pay a much lower interest than would otherwise have been the case in the absence of these regulations.

Therefore Mr. Mark Carney, since you are an experienced central banker, could one not say that the interest rates to the “infallible sovereign”, a rate often used as an approximation of the all important risk-free rate, is now being subsidized, leading us, and you, to not knowing where the hell we find ourselves?