And, what about some minimum capital requirements to cover for the credit rating agencies’ exposure in credit risk opinions?
If the banks invest in AAA rated securities then these are risk-weighted by the regulator to only signify an exposure of 20 percent and so if the banks invest $1 trillion of 1.000 billion dollars in these securities they have to put up only $16 billion in equity, the result of multiplying the now risk-weighted exposure of $200 billion times the basic capital requirement of 8 percent.
And so $16 to cover $1.000! The question that hangs in the air is why then do not the rating agencies need some capital requirements to back up the accurateness of their ratings.
I mean after taking away the $16 billion of equity of the banks their opinions are sort of backing the remaining $ 984 billion. Is it prudent to trust the word of the credit rating agency so much? You tell me!
We live in a crazy world, our financial regulators in Basel were so naïve and gullible they did not even know they were setting the credit rating agencies to be captured.
And so $16 to cover $1.000! The question that hangs in the air is why then do not the rating agencies need some capital requirements to back up the accurateness of their ratings.
I mean after taking away the $16 billion of equity of the banks their opinions are sort of backing the remaining $ 984 billion. Is it prudent to trust the word of the credit rating agency so much? You tell me!
We live in a crazy world, our financial regulators in Basel were so naïve and gullible they did not even know they were setting the credit rating agencies to be captured.
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