Old Lady, careful, the “risky” should not be asked to bear the risks of the “not risky”.

Bank of England economist David Miles has suggested that UK banks should hold double the amount of capital than that prescribed by Basel III.

Of course Old Lady (Bank of England) is right in that the capital requirements for banks should be doubled and more… but only for those loan and investments where they have been proven insufficient… like all those operations which included triple-A ratings and where the risk-weight applied was a minuscule 20%.

But, for all those operations where the risk-weights were 100%, like when lending to “risky” small businesses and entrepreneurs, the capital requirements have proven more than sufficient… and should not go up one iota…that is unless one holds that those perceived as “risky” should subsidize the capital requirements needed to support those perceived as not risky. Does Old Lady think that? I don’t think so… but I am not sure they are aware of this argument.