Thursday, August 23, 2012

Universities, standardized tests, tuition fees, banks, credit ratings, capital requirements

What if someone suggested that the tuition fees of universities should bear direct relation with the results of standardized tests? The better the results, the much lower the fees, the lower the results the much higher the fees. Sounds reasonable eh? 

That is, until sometime questions if those standardized tests really measure the diversity of capabilities we want to be present at our universities, because just the fact that already so much of the current selection process is based on these standardized tests that might be bad enough. 

In terms of bank regulations, the credit ratings, the risk perceptions, are the equivalent to those standardized tests. If those ratings are not good, borrowers will already need to pay higher interest rates, will get smaller loans and on stricter terms and so, to also have these risk perceptions count for setting the capital requirements might risk excluding some risky borrowers who could truly benefit the economy. 

And that is one of the many reasons I am so opposed to those utterly silly capital requirements for banks based on perceived risk and which by the way, in terms of the university, do not even guarantee that between those with excellent results in the standardized tests, there are not some really rotten apples, who will spoil it all.