Saturday, March 19, 2011

What Lord Turner hasn´t the foggiest about!

Since the 8 per cent capital requirement of Basel II and applied with a risk-weight of 100 per cent proved to be more than sufficient to cover for the risks of bank lending or investing in what was officially perceived as “risky”, it is clear that the problem does not lie with a too low basic capital requirement but with the too low risk-weights applied to all what is officially perceived as “not risky”.

This is what a Mr. Lord Turner, who now says “security can only come with 15 to 20 per cent” capital requirements, hasn´t the foggiest about.

Mr. Lord Turner also says “Financial instability is driven by human myopia and imperfect rationality” Absolutely! But when is he going to realize that the regulator´s myopia, including his own, might be the most systemically dangerous.