Basel regulations make banks solely finance what is ex ante safe, and not what ex post could be vital.

Sir, Martin Wolf writes “If the ECB had moved rates decisively towards zero in 2010, it might have avoided at least some of today’s difficulties”, “Why Draghi was right to cut rates”, November 13. He is wrong.

What caused this crisis and keep us from resolving it, are the capital requirements based on perceived risks. That makes banks finance what is ex ante perceived as “absolutely safe” and stops them from financing what, ex post, could have been vital.

Wolf writes about unconventional measures. There is nothing more stupidly unconventional than for bank capital requirements reusing the same perceived risks that have already been cleared for by the markets.

And Mario Draghi, having been the chairman of the Financial Stability Board, is much responsible for it all.

PS. Sir, just to let you know, I am not copying Martin Wolf with this, as he has asked me not to send him any more comments related to the capital requirements for banks, as he understands it all… at least so he thinks.