Citizens, do you agree?

We, your public servants, intend to allow the banks to hold much less capital against our absolutely safe sovereign debts than what they will be required to hold against your risky borrowings. 

This would mean that bank will be able to leverage many times more when lending to us your sovereign than when lending to you. 

And that will de-facto mean that we, as a sovereign, will have to pay much lower interest rates than what would have been the case in the absence of this regulation, while you of course will have to pay higher interest rates. 

In the name of true transparency we should perhaps disclose that this will translate into a huge tax paid by all you citizens who borrow, and of course by all the opportunities for good future jobs that are lost when we in this way curtail the access to bank credit of your risky businesses and entrepreneurs. 

Well in the name of the same true transparency we should perhaps disclose that we have already imposed these regulations with the generous assistance of the Basel Committee for Banking Supervision. They did that with Basel II. 

Though that, you should have already noticed. Frankly, how would otherwise Greece been able to rack up so much debt had it not been for banks being required to hold only 1.6 percent in capital when lending to it? 

Yes we can hear you: “What! Did you authorize our banks to leverage their capital 62.5 times to 1 when lending to Greece? Are you crazy?” 

Yes, we agree, we might have overdone it a bit, but you must also understand that for us, as public servants, it is also very important to show solidarity with fellow public servants of other sovereigns. 

Oh, before we forget, would you agree with that besides the capital requirements we should also develop liquidity requirements which in basically the same way favors our infallible sovereign and discriminates against you risky citizens? Well it really doesn’t matter as we will do it anyhow, now with Basel III. 

Sincerely, 

Your baby-boomer public servants 

Après nous, le déluge.