August 05, 2014

How long have our economies got left with our banks having been injected with the venom of cowardice?

Sir, Martin Arnold and Tom Braithwaite report “HSBC’s warns of risk-aversion” August 5.

Of course you know very well that I hold that excessive risk aversion is what most threatens our economies but, to read of banker like HSBC’s Douglas Flint expressing concerns about “a growing danger of disproportionate risk aversion creeping into decision making of our business”, without mentioning the largest source of risk aversion for banks, the risk weighted capital requirements for banks, is maddening.

The disproportionate risk aversion of bank regulators, have banks now earning much higher expected risk adjusted returns on their equity on assets perceived as safe, which they can leverage much more, than on assets perceived as risky. And that has injected into our banks the venom of cowardice…

How long our economies can be sustained without medium and small businesses, entrepreneurs or start-ups having fair access to bank credit is hard to say, but one thing is really sure, if that risk aversion persists, our economies will go down down down.

Douglas Flint, as a banker might very well be doing his fair share of dressing up what is risky as more safe but, as a citizen, as a father, possibly even as a grandfather, and as someone who should understand the meaning of risk taking, he should be ashamed of himself. What is in it for our descendants if our generation refuses to take its proportionate and necessary share of risks required for moving the world forward?

And that, of course, goes also for many of you in FT too.

The awful truth is that risk weighted capital requirements for banks, are robbing our young of their horizons.