Economist Andrew Haldane. At least when acting as a bank regulator, you are admitting the wrong error you committed

Chief economist of Bank of England Andrew Haldane says “his profession must adapt to regain the trust of the public, claiming narrow models ignored ‘irrational behaviour’” “Chief economist of Bank of England admits errors in Brexit forecasting” The Guardian, January 5, 2017.

Hold it Mr Haldane! What you and other economists ignored. when acting as regulators, was that banks would, as always, behave perfectly rational, and lend to what they expected would yield them the highest risk adjusted returns on equity.

That is what you failed to understand when allowing banks to hold less capital against what was perceived, decreed or concocted as safe. That meant banks could leverage more, and so earn higher expected risk adjusted returns on equity, when lending to the “safe”. 

That distortion in the allocation of bank credit to the real economy, resulted in that banks end up lending too much at too low interest rates to the “safe”… which could be risky for the banks; and to little and too expensive to “risky” SMEs and entrepreneurs which is very dangerous for the economy.

Come on Mr. Haldane I dare you to answer the following verybasic questions.

Bank regulators, don’t try now to hide your responsibility for failures behind sophistications. It was pure hubristic ineptitude.

I refer to Andy Haldane’s “The Dappled World” 

Bank regulators don’t try now to sophisticate the reasons you all got it so very wrong. These were very simple.

You did not define the purpose of banks before regulating these.

You ignored to study why banks fail and kept to why bank assets fail, which of course is pas la meme chose.

You ignored that banks look to maximize their risk-adjusted returns on equity, before distorting the allocation of bank credit with your risk-weighted capital requirements for banks.

You ignored the monstrous systemic risks that putting so much decision power into the hands of so human fallible credit rating agencies implied.

You imposed you statist ideological preferences with the risk weights of 0% for the Sovereign, and 100% for We the People.

No! Anyone who has ever walked on main-street, and seen the difficulties those perceived as risky have in accessing bank credit would have understood how loony these regulations were. Frankly, you do not have to be a PhD for that 

Yes, Basel III has to be thrown out the window, in its entirety

Andrew Haldane, Bank of England's executive director for financial stability said in a speech during the 2012 Jackson Hole meetings, "less may be more" when it comes to financial regulation, and called for a "de-layering" of the Basel III accord to focus more on simpler gauges of bank stability. 

And he is absolutely right! By accepting to engage banks through complex regulations, the regulators have acted less as regulators and more as risk-managers… which does not make any sense, since a regulator’s prime responsibility is to prepare itself for when risk-management fails.

But there are of course many more reasons to throw Basel III, and the Basel Committee regulators too, out the window.