Thursday, March 16, 2017

Dr Andreas Dombret your Basel I, II and III will be discovered as a truly ugly piece of Ramsey statue.

I will quote from Dr Andreas Dombret speech “Basel III - goal within sigh” delivered at the Bundesbank symposium on "Banking supervision in dialogue", Frankfurt am Main, 15 March 2017. 

The Member of the Executive Board of the Deutsche Bundesbank stated:

“The statue of Ramses is not only a work of art; it is also testament to the highest quality of craftsmanship, which is one major reason it has survived for three thousand years. Figuratively speaking, this is how we, too, must approach the Basel reform package. It’s not just about developing uniform, consistent rules – risk sensitivity is another of our guiding principles. During the negotiations, we will therefore call for higher risk to go hand in hand with higher capital requirements.”

Dr. Dombret if you and your regulatory technocrat buddies keep on insisting that what is perceived as risky is the stuff major bank crises are made of, your Basel regulations will doom the banks and the real economy.

You state “The equity ratio of German banks and savings banks has risen by more than half a percentage point to currently 16.2% since September last year, which was due primarily to the reduction in risk-weighted assets”, and I ask: How do you know that the reduction in risk-weighted assets did not affect those assets your banks most need to hold for your real economy not to stall and fall? 

Dr. Dombret, if you read this comment please answer these following questions, if you dare!