The most important structural reform needed, is in the hands of central banks and the Basel Committee

Sir, Richard Barwell and Steven Friedman, commenting on David Folkerts-Landau’s “Economic dogma threatens the Eurozone” write: “Mr Folkerts-Landau seems to think the ECB should focus on: politicians delivering structural reforms. Unfortunately, history is rife with examples of politicians delaying hard choices indefinitely, or failing to see the best way out of a deepening crisis” “ECB chose to keep fighting to achieve mandate” May 9.

I do not agree. Mario Draghi is 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 for Banking Supervision. And therefore Draghi is in the position to push, without the help of politicians, for the most important structural reform needed, namely the elimination of the distortions in the allocation of bank credit to the real economy produced by the risk weighing of the capital requirements for banks.

I hereby link to an aide memoire describing why some urgent and serious revisions of current bank regulation are needed.

@PerKurowski ©