May 29, 2015

Stop blaming low productivity on the “bonus culture” there are even worse cultures, like the Basel Committee’s

Sir, I refer to Andrew Smithers’ “Executive pay holds the key to the productivity puzzle”. May 29.

Smithers writes: “Productivity improves with the amount of capital per employee, and the efficiency with which it is used…. We do not know how to improve the efficiency with which capital is used”.

Yes we do! And the first thing to do is to eliminate those odiously manipulating credit-risk-weighted capital requirements for banks, which distorts all the allocation of bank credit to the real economy.

Of course bonuses distorts but, in the great scheme of things, there is little to be achieved correcting for that, in the bigger companies where the problem is present, if we do not allow all “the risky” SMEs and entrepreneurs to have fair access to bank credit, because of outrageously dumb regulations.

Really, unless blessed with eternal ignorance, how can bank regulators live with themselves knowing what they are doing?