May 26, 2015

William Coen. Do you really think that government bureaucrats use bank credit more productively that SMEs and entrepreneurs?

Sir, I refer to Laura Noonan, Caroline Binham and Barney Jopson reporting that “Basel group faces up to compliance challenge” May 26.

We read David Green stating that still to be answered “is whether the new regulations actually does what it was intended to do and whether the side effects are acceptable, whether they are intended or not”. And that is something that does not sound quite unimportant eh?

But then William Coen, head of the Basel Committee’s secretariat, tells us “We hear quite often about unintended consequences of our reform when, in fact, the effects of our reforms are actually fully intended; some just don’t like them”.

But here then is a question to Mr. Coen.

The Basel Committee uses credit-risk weighted capital requirements for banks were the weight of governments is 0% while the weight of SMEs and entrepreneurs is 100%... and that is something quite discussable, especially in these days when governments announce they need to use financial repression in order to impose informal haircuts on their obligations.

But worse, much worse, looked at from the opposite side, it tells us that the Basel Committee for Banking Supervision feels that the risk of bank credit not being used productively is 0% for government bureaucrats, and 100% for SMEs and entrepreneurs.

Is that really what you believe and have intended to say Mr Coen? Are you a communist?