Tuesday, October 15, 2013

The Financial Stability Board is still without a clue of how banks best serve the needs of the real economy

It opens with:

“In Washington in 2008, the G20 committed to fundamental reform of the global financial system. The objectives were to correct the fault lines that led to the global financial crisis and to build a safer, more resilient source of finance to serve better the needs of the real economy.”

And it concludes with:

The completion and full, timely and consistent implementation of reforms will not only build more resilient national systems but also, by building confidence in each other’s commitments, support a more effective and open system. The result will be a resilient global financial system that serves an increasingly global real economy throughout the economic cycle, including the inevitable economic shocks. That system will best support the ultimate objective of strong, sustainable and balanced economic growth and job creation.

And the whole statements does not mention even once, much less recognizes it, the number one fault line which not only led directly to the financial crisis, but also impedes banks from serving the needs of the real economy and the creation of jobs.

And I refer, of course, to the so rotten pillar of the Basel Committee’s regulations, namely the risk-weighted bank capital requirements, those which lead banks to solely refinance the past and not finance the future.

These regulators, they just care about the banks, they do not care about the real economy.

God help us!