January 27, 2017

Rising productivity cannot result when regulatory risk aversion is distorting the allocation of bank credit

Sir, Martin Wolf writes: “UK’s future income will depend on rising output per hour” “The productivity challenge to the British economy” January 27.

To be able to increase productivity is not a God given right. In general it requires a lot of risk-taking, like loans to SMEs, entrepreneurs and start-ups. The risk weighted capital requirements for banks represents a big effective wall against such risk taking. But on that Wolf has steadfastly kept mum.

PS. I dreamt last night that I had finally gotten an answer from the regulators on my questions… but then I woke up L