Citizens should question the purpose of banks, but FT should also have a duty to forward those questions.

Sir, Saker Nusseibeh writes that citizens should question the purpose of the financial system “Systemic moral hazard is embedded in current economic view”, FTfm August 2.

Indeed, but that is mostly because the regulators never found it necessary to define the purpose of our banks, before regulating these.

With technocratic arrogance they decided that when banks lend to “safe” governments and to members of the AAArisktocracy, these should be allowed to hold much less capital (equity) than when lending to the “risky”, like to the SMEs and entrepreneurs.

That meant that banks would then in relative terms lend more and at lower rates to “safe” governments and members of the AAArisktocracy, than they would in the absence of these regulations.

And that means, almost explicitly, that regulators believe “safe” governments and members of the AAArisktocracy can use bank credit more efficiently than what SMEs and entrepreneurs can do. And that is of course pure and unabridged lunacy.

I have been questioning those capital requirements, for more than a decade, in soon 2.000 letters to the Financial Times. Long time ago I was told these were ignored because I was becoming tiresome and monotonous… as if that has anything to do with the fundaments or importance of my questions.

Again, FT why do all of you believe capital requirements for banks, those which are to cover for unexpected losses, should be higher for the risky than for the safe, only because the former present higher expected losses? I dare you to give me one single reason for it and then be willing to debate it publicly.

@PerKurowski

PS. From a 2003 World Bank workshop on bank regulations: “I have been sitting here for most of these five days without being able to detect a single formula or word indicating that growth and credits are also a function of bank regulations.”