Bank regulators who for no good reason favor “The Infallible” over “The Risky” are unethical, and dumb too.

Current Basel capital requirements for banks, being implemented all around the world have, as their fundamental pillar, capital requirements which are based on perceived risks, more-risk-more-capital, less-risk-less-capital, and this even though those perceptions have already been cleared for, by means of interest rates, size of exposure and other terms. 

That allows the banks to leverage their equity much higher for exposures to what is perceived as “safe” than for exposures to what is perceived as “risky”. 

And that allows the banks to earn much higher expected risk-adjusted returns for exposures to what is perceived as “safe” than for exposures to what is perceived as “risky”. 

And that favors those already favored by being perceived as “safe”, and this translates directly into additional regulatory discrimination against those already discriminated against, precisely by being perceived as “risky”, whether they really are risky or not. 

And that only helps to widen the gap between the haves, the old, history, the developed, “The Infallible” and the have-nots, the young, the future, the developing, “The Risky” and that is highly unethical.

And that is dumb too, not only because never ever have major bank crisis resulted from excessive exposures to what is perceived as risky, these have always resulted from excessive exposures to what is perceived as “absolutely safe” but turn out not to be; but also because keeping access to bank credit in competitive terms for "The Risky", is about the most important financial function of banks.