Regulators, in order to regulate banks, should define the purpose of banks. ​​They have not done so :-(

Sir, I refer to Alison Mason letter “Bankers see nothing from the client’s perspective” December 20.

In it she correctly mentions that too much attention is given to what the bankers need and want, and no attention is given to what bank borrowers need and want. And for that to change, “it requires a cultural shift back to a previous way of thinking of banks as intermediary between those who have capital and those who need it”.

I agree, but since there is not a word in current bank regulation that indicates what is the purpose of the bank, it would at least be a very good start if regulators had to explicitly state one, and then try to regulate in accordance.

As is regulators think the only role of banks is to avoid taking risks, and so they allow banks to hold very little capital (equity) against what is perceived as absolutely safe, when compared to what they need to hold against what is perceived as risky.

And banks love it of course, since that way they are able to obtain higher risk-adjusted returns on their equity when financing “the infallible” than when financing the risky.

“The infallible” meaning sovereigns, housing finance and member of the AAAristocracy also love it, since that way their bank borrowings are really subsidized.

It is of course those perceived as risky, like the small businesses and entrepreneurs who are left out in the cold. Precisely those tough risk-takers our unemployed young most need to get going, in order to avoid their going being made unnecessarily tough.