Two questions Mr. Kay, on “strict liability” and bank regulators.

Sir, John Kay makes a convincing case for applying “strict liability” to bankers, especially when ending with that clarifying principle “if you take the bonus, you take the rap”, “If you do not want to do the time, prevent the crime” August 6.

That said I have two questions to Kay with respect to “strict liability” and their applicability to bank regulators.

First, suppose a regulator knows very well that allowing for lower capital requirements for banks on assets perceived as absolutely safe than on assets perceived as risky could, in the long run, risk the buildup of dangerously large exposures to what is now perceived as safe, but he allows it anyhow because he does not want to be held responsible for any bank failure under his watch…. are we talking about something for which “strict liability” could be relevant?

Second, if you as a bank regulator are explained something, like that which is contained in the Basel Committee on Banking Supervision’s Explanatory Note on the Basel II IRB Risk Weight Functions of July 2005, and you do not understand it, but yet, without asking for clarification, because you do not want to see as if you do not understand, you approve of any regulations based on that information, and disaster ensues… are we talking about something for which “strict liability” could be relevant?

In the case of bank regulators, should not something like “if you take the promotion, you take the rap” also apply?