Saturday, January 24, 2015

The difference between reasonable parents and the Basel Committee for Banking Supervision

Normal reasonable parents may advice their children “Please be careful when crossing the street”, because they know that children might be somewhat careless, especially when they do not perceive a special risk.

We would definitely find it curious if we heard parents waving goodbye to their children with the admonition of: “Children please don’t go bungee-jumping, cause that seems very risky”.

The Basel Committee for Banking Supervision though, does completely the opposite. It tells its bank-children, by forcing them to have more equity, not to take any risks on what is perceived as risky bungee-jumping bank lending, like lending to small businesses and entrepreneurs;

... while stimulating the carelessness of banks, by allowing them to have much less equity, when engaging in perceived safe street-crossing lending, like...


Please, can’t we send some normal reasonable parents to guide and mentor our loony bank regulators?