May 17, 2016

FT, “Without fear and without favour”, stand up to a bank regulation “strongman” like Mario Draghi.

Sir, Gideon Rachman writes of “a global trend: the return of the ‘strongman’ leader in international politics” “Trump, Putin and the lure of the strongman” May 17.

Yes it is a worrying trend, but perhaps the Financial Times should also look at the existence of typical “strongman” in the current financial system, for instance Mario Draghi.

As I recall you have only expressed admiration for Draghi’s macho man’s “Whatever it takes” growls, without questioning much whether he has the right to do the “whatever”.

Of course, Draghi has also been able to “trade on feelings of insecurity, fear and frustration” but one should be able to expect a media that prides itself with the “Without fear and without favour” motto, to stand up a bit more against a "strongman".

And especially when there are all reasons to suspect that Draghi, the former chair of the Financial Stability Board and the current chair of the Group of Governors and Heads of Supervision of the Basel Committee, has little idea about what he is doing, at least when it comes to bank regulations.

Rachman writes of a “mutual admiration society”. Clearly only such a society would have been able to generate risk weights of 150% for the below BB- rated assets and only 20% for what is rated AAA. In any other society, someone would have posed the question I make over and over again, namely: Is not what is ex ante perceived as safe not riskier ex post for the banking system, than what is ex ante perceived as risky?

FT stop admiring so much strongman Draghi, and start to ask him and his colleagues the many questions that are pending. Like: Why do they base the requirements for that capital that should be there in case of unexpected losses, on the most already cleared for bank risk, the expected credit losses?

@PerKurowski ©