Mr. Bob Diamond. Is not a level playing field for borrowers in the real economy accessing bank credit, even more important?

Sir, Bob Diamond, a banker, holds that “A level [regulatory] playing field… is essential to ensure banks have consistent and predictable financial targets” “‘Too big to fail’ is still a threat to the financial system”, September 16.

But, is not a level playing field for when the actors in the real economy access bank credit even more important? Because, there is no level playing field there as long as bank regulators allow for different capital requirements based on perceived risk.

Currently banks are earning much much higher risk-adjusted returns on equity when lending to “The Infallible”, like to some sovereigns, housing and the AAAristocracy, than when lending to “The Risky”, like to SMEs, entrepreneurs and start-ups.

And that as you of course would understand, but that bankers prefer to conveniently ignore, causes, consistently and predictably, our banks to lend too much, at too low interest rates and in too lenient terms to “The Infallible”, and too little, at too high rates and in too strict terms to “The Risky”. And that is a distortion inflicted on the real economy, and therefore also a threat to the financial system.