Urgently fire those damn bank regulators who abandoned the young and ignored their needs for jobs and a future
Sir, I refer to the true tragical horrors described by Tobias Buck in “The fear and despair of Spain’s young jobseekers” March 2.
And I tell you again, though you will most probably ignore me again, that nothing as serious as that would have happened had not some few powerful and arrogant bank regulators, while trying to level the field for banks to compete, unleveled the real economies’ access to bank credit.
Read the chapters of “Capital adequacy and the Basel Accord of 1988” and “The BCBS and the social sciences” in Charles Goodhart’s “The Basel Committee on Banking Supervision: A History of the early years 1974-1997” 2012, Cambridge Press and you will understand. There is not one single reference to that how banks allocate credit to the real economy was of any concern whatsoever to regulators. And most probably it still is not.
Had they given that banks’ social purpose the slightest thought, they would have understood, unless too dumb, that their credit risk weighted capital requirements for banks impeded banks to adequately serve the economy.
Allowing banks to leverage equity differently based on “risk”, allows banks to earn higher risk adjusted return on equity on what is perceived or deemed to be“safe”, than on what is perceived as “risky”
So now “The safe” get too much credit on too lenient terms, while “The Risky” have no access to bank credit, that is unless they pay much higher risk adjusted premiums than they would ordinarily have to pay in an undistorted market.
Houses are safe so lend to that, but SMEs and entreprenuers the job creators are risky so cut them off!
Sovereigns are safe so lend to these, but the private sector is risky so, except for the AAArisktocracy, cut it off!
And so now our banks do not finance the “riskier” future they just refinance the “safer” past.
These regulators must be stopped! They are financial terrorists who threaten the future of our kids. And you FT must stop covering up for them.
“A ship in harbor is safe, but that is not what ships are for” John Augustus Shedd, 1850-1926
But not even ships are safe in a safe harbor if that harbor gets to be dangerously overpopulated.
@PerKurowski ©
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