Is it really possible that the Basel Committee bank regulators did not think of this?

When a bank client, perceived as more risky, like for instance your average small business or entrepreneur, is requested to pay for instance 5 percent or more on their loans than what a triple-A rated client pays, where do you think that 5 percent or more goes to when it gets repaid? The answer is to bank equity of course. That is what we could call the market´s risk-weights.

And when a regulator decides that a triple-A rated client generates only a 1.4 percent capital requirement for the bank (the Basel III 7 percent, adjusted by the risk-weight of 20 percent), while your average risky small business or entrepreneur generates a capital requirement of 7 percent, where do you think the about 2 percent in additional interest that your average small business or entrepreneur has to pay the bank in order to make up for the bank´s opportunity costs goes? The answer is to bank equity of course. This is what we call the regulator´s risk weights.

And so we have a world where, out of the blue, the Basel Committee decided that all our small businesses and entrepreneurs, those whom we should be most interested that our banks finance, well they have to run with under the weight of two different sets of risk-weights.

What kind of handicap officer is thia Basel Committee, taking off weights from those who have been running nicely and putting weights on those who have not run as good or are debutants? I would say that handicap officer is completely nuts or he has completely misunderstood his role.

The best way to end the markets’ addiction to the credit rating agencies is to end the regulator´s obsession with the credit rating agencies.