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!

http://subprimeregulations.blogspot.com/2016/12/must-one-go-on-hunger-strike-to-have.html

ECB, IMF: Unbelievable, Greece’s “Memorandum on Economic & Financial Policies” does not include what Greece most needs

For more than a decade and still at this particular moment any European bank, including Greek banks, has been required to hold much more equity when lending to any Greek small business or entrepreneur, than when lending to any European sovereign or European corporation that possesses a good credit rating. 

And therefore European and Greek banks, scarce of equity, are not lending sufficiently to Greek small businesses or entrepreneurs… nor for that matter to other European small businesses or entrepreneurs.

And anyone who believes Greece (and Europe) can be pulled out of its current problems, by not giving fair access to its small businesses or entrepreneurs, has no idea of what goes on in the real economy. 

If there is something Greece (and Europe) needs, urgently, is to get rid of those odiously discriminating risk adverse equity requirements, those which have banks not financing the risky future any longer, but trampling stale water, only refinancing the supposedly safer past.

“A ship in harbor is safe, but that is not what ships are for.” John Augustus Shedd, 1850-1926 

God make us daring!

PS. In relation to this you might be interested in: “Who did Europe in!”

PS. Here is a more complete explanation of what is wrong.

PS. Here is an alternative action plan for the ECB.

How dumb can we allow our bank regulators to be?

The Financial Stability Board in its meeting on June 24, 2013 in Basel declared:

“Despite important progress in strengthening the resilience of the global financial system, some parts of the system remain in a state of incomplete repair. Some jurisdictions need to continue to improve the capitalisation of their banking systems.”

But, of course, not a word that it was them, and their chums at the Basel Committee who, with that mother of all bad inventions, namely the capital requirements for banks based on perceived risk, allowed the banks to explode their balance sheets on what was perceived as “absolutely safe” holding almost no capital; and completely ignoring the fact that all major bank crisis, no exclusions, have detonated because of excessive exposures to what was perceived as “absolutely safe”, but turned out not to be.

1.6 percent in capital, a 62.5 to 1 leverage when lending to Greece but 8 percent capital, five times less, a 12.5 to 1 leverage when lending to a German unrated entrepreneur. How dumb is one allowed to be?

These regulators should all be sent home… disgraced... and paraded with a dunce cap, a cone of shame, on their heads.

PS. This was written before I knew that EU authorities had assigned all eurozone sovereigns, including Greece, a 0% risk weight, which meant allowing infinite leverage.

PS. My letter to the Financial Stability Board

How on earth have German bank regulators avoided being blamed for bad German bank lending to Greece?

If German banks had only two clients, German small businesses and Greece, and where required to hold 8 percent in equity, 12.5 to 1 leverage, they would lend their funds to whoever produced the highest risk-adjusted return on that 8 percent equity. 

But if German regulators told the German banks that though in the case of the German small businesses they still needed to hold 8 percent of equity, in the case of Greece, only because regulators considered Greece to be safe given its ratings, German banks had only to hold 1.6 percent of equity, allowing them 62.5 to 1 leverage… who do you think German banks would lend to? 

It is amazing how German bank regulators have avoided to be held accountable for what happened. That same question holds of course for the bank regulators of most other countries.