What would Martin Wolf tell the Basel Committee for Banking Supervision, if he were India’s Development Minister?
Sir, I refer to Martin Wolf’s “India has a real chance to excel on growth” March 11.
Suppose Martin Wolf was a developing minister in a developing country like India and was presented with bank regulations which would allow banks in India to leverage much more their equity when lending to what from a credit risk was perceived as safe than when lending to what was perceived as risky; which of course means banks will be able to earn higher risk adjusted returns on equity when lending to the safe than when lending to the risky; which of course means banks will lend too much at low rates to what is perceived as safe and too little at relative too high rates to those perceived as risky… namely SMEs and entrepreneurs.
What would Martin Wolf say? Would he apply those regulations or would he show the proponents the door with a “Get out! Don’t you know that risk-taking is the essence of development? Do you really think your developed countries would have been able to develop with that type of regulations? Don’t you know that our safest of tomorrow might be among our riskiest of today?”
@PerKurowski
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