December 07, 2016

Damages by Euribor rigging are peanuts compared to bank regulators’ rigging of credit allocation to the real economy

Sir I refer to Rochelle Toplensky and Martin Arnold write on “Brussels will hit HSBC, JPMorgan and Crédit Agricole today with multimillion-euro fines for rigging the Euribor interest rate benchmark” “Three banks fined over rate-rigging” December 7.

For years I have argued that if banks are to be fined, they should pay those fines in shares, since having their capital diminished by forcing them to pay cash, is pure masochism as that will affect their capacity to give credit; and since we also want banks to hold more capital.

But also in this case let me note that whatever damages these banks could have caused with their rigging of Euribor, these are peanuts when compared to what bank regulators did by rigging, with their risk weighted capital requirements, the allocation of credit to the real economy with their risk weighted capital requirements for banks.

If not fined, these regulators should at least be publicly shamed and banned forever from regulating banks… or anything else.