December 08, 2015

Europe, trash the distorting credit risk weighted capital requirements for banks.

Sir, Martin Wolf writes: “If the monetary policy that stabilises supply and demand in the real economy destabilises the financial system, the problem lies in the latter. It must be dealt with forcibly and directly” “The challenges of central bank divergence”, December 9.

Absolutely, in general terms the good functioning of the real economy is more important than the good functioning of the financial system.

But I wonder then why, if the regulatory system of the financial system distorts credit allocation to the real economy, Wolf does not see a similar urgent problem. Or is it that he still does not believe credit risk weighted capital requirements for banks do distort?

Wolf writes: “The unnecessary weakness of the eurozone economy has gone on too long” 

Indeed Mr Wolf, it is high time to trash current bank regulations that impede the risk-taking that supports the future and only fosters excessive financial risk-taking on the past.

@PerKurowski ©