Mr. John Kay, if the pillar of Basel’s bank regulations is futile, is that not a BIG story?

Sir, I refer to John Kay’s “Britain is leading the world when it comes to bank reform” June 26.

In it Kay writes “The Swiss National Bank recognized the futility of the Basel process of attempting to fine tune capital requirements to a particular risk profile of individual banks. It understood that the only way of providing adequate capital for a future that models will certainly fail to predict is to have lots of it.”

But if this is commented so naturally by Mr. Kay, may I ask where he has been all these years? If the principal and perhaps even sole pillar of all Basel II and III bank regulations, namely capital requirements based on perceived risk is futile, would that not be BIG news?

Considering all the letters I have sent Kay and his colleagues on the many problems with those capital requirements, and about which he and his colleagues have kept total silence, it does seem a bit shameless on his part to now come out as an “I always thought so”.

And Sir, I say this primarily because the number one lesson that needs to be learnt from this crisis, is how to avoid the risk of a besserwisser group of regulators coming up with something entirely baseless, and imposing it on the world, and the silence of Kay and his colleagues, even when informed of the mistakes, is part of that story that needs to be told.

And I am also saying this because the pain inflicted by those regulations on the real economy, by distorting the allocation of banks credit, is surely even larger than those afflicted upon the banks, and that part of the story has not yet even been acknowledged, not even by the Swiss National Bank.

And since John Kay makes a reference to Mark Carney let me tell you that I am not really sure you would benefit from having someone who has been and is Chairman of the Financial Stability Board, and therefore part of the regulatory establishment that came up with the Basel nonsense, and who might therefore have a vested interested in defending it, as the Bank of England governor.