Monday, October 15, 2012

Immoral, useless and outright dangerous; what more do you need to repel Basel bank regulations?

The fundamental pillar of the Basel Committee's bank regulations is capital requirements with risk-weights based on ex-ante perceived risk.

The way those capital requirements favor the access to bank credit of “The Infallible”, those already favored by markets and banks, and discriminate against that of “The Risky”, those already discriminated against by banks and markets… is immoral.

Those capital requirements are also useless, because they give banks incentives to stay away from taking manageable risks on “The Risky”, those who never ever caused a major bank crisis, and to instead take unmanageable risk on “The Infallible”, those who always have been the origin of all bank crises.

Those capital requirements are also outright dangerous, as these completely hinder the banks from performing an efficient economic resource allocation.

What more do you need to repel them?