Yes “The Risky” borrowers are forced into the shadows, by criminally stupid bank regulators.

Sir, Anne-Sylvaine Chasanny’s and Henny Sender’s title, “Forced into the shadows”, June 7 describes precisely the results from having capital requirements for banks based on perceived risk which so odiously discriminates against the access to bank credit all those who are not perceived as “absolutely safe”. Though, where it says, “With Europe’s banks reluctant to lend”, a better phrasing would be “With Europe’s banks ordered not to lend to those perceived as risky”, because that is in effect what happens when with bank equity being extremely scarce, regulators tell banks they need more of it when lending to “The Risky” than when lending to “The Infallible”

I have explained this in perhaps over a thousand letters to FT, over many years, but FT has never understood or wanted to acknowledge how these bank regulations distort the resource allocation in the real economy. Yes, “The Risky” are being forced into the shadows, by criminally stupid bank regulators, and there is no other way to describe these.