#AI #Grok: What is the impact on small cities of the risk weighted bank capital requirements?

I asked Grok:

"Loan officers of small city community banks normally attended the credit needs of the local small businesses and entrepreneurs. Once risk weighted bank capital requirements entered into effect, big city financial engineers took over. How has that affected small cities?"

Grok answered:

"The introduction of risk-weighted capital requirements, primarily through the Basel Accords starting in the late 1980s and evolving with Basel II (2004) and Basel III (post-2010), shifted banking from localized, relationship-based lending by community bank loan officers to more centralized, model-driven risk assessment and securitization by large financial institutions. This change aimed to enhance bank stability but imposed higher compliance costs and capital burdens, particularly on smaller banks, leading to several interconnected effects on small cities and rural areas.

Increased Bank Consolidation and Reduced Local Presence

These requirements contributed to a wave of mergers and acquisitions, as smaller community banks (typically with assets under $10 billion) struggled with the fixed costs of compliance, risk modeling, and reporting. For instance, the number of community banks declined by about 24% from 2010 to 2017, with regulations explaining up to 31% of merger activity during that period. Exit rates for community banks averaged over 4% annually from 2014 to 2019, highest among small, young, and metropolitan-area institutions, but also notable in non-metro (rural) areas. This consolidation often resulted in branch closures, with a 15% overall decline in branches from 2010 to 2017, disproportionately affecting rural counties where community banks hold the majority of deposits and are four times more likely to operate offices. In over 1,200 U.S. counties (home to 16.3 million people), the loss of community banks could severely limit physical access to banking services, as seen in cases like Harding County, New Mexico, which lost its last bank in 2014, forcing residents to travel hours for basic services.

Changes in Lending Practices and Reduced Credit Access

The shift favored large banks’ ability to use advanced internal ratings-based (A-IRB) models under Basel II and III, potentially lowering their capital needs for certain loans and giving them a competitive edge in pricing. Community banks, sticking to simpler Basel I rules, faced incentives to concentrate on riskier assets like commercial loans, while losing ground in lower-risk areas like mortgages. This led to stricter lending standards: from 2010 to 2017, 79% of community banks increased documentation requirements, 69% extended loan processing times, and 45% raised minimum credit criteria, attributing 60-97% of these changes to regulations. Access for “atypical” borrowers (e.g., self-employed or those reliant on asset income) decreased for 26% of banks, with 86% linking this to regulatory scrutiny.

Small businesses in small cities, often opaque or non-standard risks, bore the brunt. Community banks provide about 51% of small business loans nationwide, but their lending volume fell 11% from mid-2010 onward, with market share dropping 1.7%. In rural areas, where these banks are primary lenders, regulations like mortgage rules under Dodd-Frank exacerbated this, with over 30% of small mortgage lenders reducing holdings at an annualized rate of 5% or more from 2013 to 2019. Higher fees (reported by 38% of banks) and compliance costs (up to 12% of operating expenses, 2.5 times higher for small banks) further raised borrowing costs. 

Economic Implications for Small Cities

These dynamics have broader ripple effects on local economies:

Impact Area	Description	Supporting Evidence
Credit Availability	Reduced lending to small businesses and entrepreneurs, pushing them toward costlier alternatives like credit unions (which increased small business lending 109% from 2010-2017) or nonbanks.	A $1 capital reduction at small banks has a larger effect on local economic activity than at large banks, potentially causing credit crunches in downturns.
Business Growth and Jobs	Slower expansion for local firms, as relationship lending—key for opaque borrowers in small towns—is replaced by standardized models, limiting investment and job creation.	Regulations contributed up to 23% of changes in total business lending from 2010-2016, with tighter standards affecting newer or riskier businesses.
Overall Economic Activity	Potential stagnation in rural and small-city economies, with branch losses reducing mainstream banking access and diverting resources from lending to compliance.	Community banks' disappearance could lead to permanent credit falloffs in rural areas, where they are essential for financing local households and businesses.

While some community banks gained small business loan market share post-consolidation (e.g., during 1994-2000 waves), the overall trend has been toward diminished local control and credit tailored to small-city needs, fostering economic concentration in larger urban centers.

I said: Thanks!

It said: You're welcome! If you have more questions, feel free to ask.

Here is how ChatGPT answered that exact question.

Here is a “report” on how George Banks reacted when confronting the world of risk weighted bank capital requirements.

Note: The answers are copied exactly from those given to me by ChatGPT

Here my many other questions to ChatGPT – Grok on bank regulations

#AI #ChatGPT: What is the impact on small cities of the risk weighted bank capital requirements?

I asked ChatGPT:

"Loan officers of small city community banks normally attended the credit needs of the local small businesses and entrepreneurs. Once risk weighted bank capital requirements entered into effect, big city financial engineers took over. How has that affected small cities?"

ChatGPT answered:

That’s a sharp observation. Here’s the essence:

When Basel-style risk-weighted capital requirements came into play, banks could hold less equity against sovereign debt and highly-rated securities, while needing more equity against loans to small businesses and entrepreneurs.

Before

In small cities, community bank loan officers knew their customers personally.

Credit decisions relied on relationship banking and local knowledge, not just collateral or ratings.

Local businesses and entrepreneurs had a direct path to financing.

After risk-weights

Lending to governments and buying securitized assets became cheaper in terms of required capital.

Lending to small businesses became relatively more “expensive” (higher capital charge).

Large financial institutions in big cities, with access to securitization, derivatives, and rating agencies, thrived under this framework.

Community banks lost competitiveness because their natural activity—small business lending—was penalized by the rules.

Impact on small cities

Credit scarcity – local entrepreneurs found it harder to get loans, even if viable, because banks had regulatory incentives to deploy capital elsewhere.

Erosion of local banking – many small community banks consolidated or disappeared. Decision-making shifted from local officers to distant credit models.

Economic concentration – small cities became more dependent on external capital flows and large financial centers.

Reduced dynamism – fewer startups, less risk capital for local ideas, and slower job creation relative to cities with larger financial institutions.

In short, regulation tilted the scales toward “safe” assets and large-scale finance, weakening the traditional ecosystem that supported small-city entrepreneurship.

Would you like me to phrase this in a 200-word “policy memo” style summary—something you could use in discussions with regulators or economists?

I said: Please do.

ChatGPT said:

Here’s a compact policy memo–style summary (≈200 words):

Subject: Impact of Risk-Weighted Bank Capital Requirements on Small Cities

The introduction of risk-weighted bank capital requirements fundamentally altered credit allocation in the U.S. financial system. Under these rules, banks are permitted to hold less equity against sovereign debt and highly rated securities, while loans to small businesses and entrepreneurs require significantly more capital.

In small cities, community banks historically met local credit needs through relationship lending, relying on knowledge of borrowers and their reputations. This system worked effectively for supporting small businesses, startups, and local job creation. However, the new capital framework unintentionally penalized this activity.

Large financial institutions in major cities, with access to securitization and rating agencies, gained a competitive advantage. They could profitably channel funds into assets treated as low-risk under regulation, while community banks faced higher regulatory costs for their traditional lending.

The consequences for small cities have been significant:

Credit scarcity for entrepreneurs and small firms.

Consolidation and decline of community banks.

Shift in decision-making away from local officers toward distant financial centers.

Reduced economic dynamism and slower job creation.

In effect, regulations designed to strengthen bank safety have unintentionally weakened small-city economies by discouraging local, entrepreneurial lending.

Would you like me to also contrast this with a simple leverage ratio regime (same capital for all assets), so the memo suggests a potential remedy?

I said: Please do

ChatGPT said:

Here’s the revised memo with the contrast built in:

Subject: Impact of Risk-Weighted Bank Capital Requirements on Small Cities

The introduction of risk-weighted bank capital requirements fundamentally altered credit allocation in the U.S. financial system. Under these rules, banks are permitted to hold less equity against sovereign debt and highly rated securities, while loans to small businesses and entrepreneurs require significantly more capital.

In small cities, community banks historically met local credit needs through relationship lending, relying on knowledge of borrowers and their reputations. This system worked effectively for supporting small businesses, startups, and local job creation. However, the new capital framework unintentionally penalized this activity.

Large financial institutions in major cities, with access to securitization and rating agencies, gained a competitive advantage. They could profitably channel funds into assets treated as low-risk under regulation, while community banks faced higher regulatory costs for their traditional lending.

The consequences for small cities have been significant:

Credit scarcity for entrepreneurs and small firms.

Consolidation and decline of community banks.

Shift in decision-making away from local officers toward distant financial centers.

Reduced economic dynamism and slower job creation.

By contrast, a simple leverage ratio—the same equity requirement for all assets—would avoid distorting banks’ incentives. It would restore a level playing field for community banks, allowing local loan officers once again to serve small businesses on the basis of risk judgment and relationships rather than regulatory preference.

Would you like me to make this even shorter—say, under 150 words, in the style of a briefing note for a policymaker who only has 2 minutes?

I said: Another day. Thanks!

ChatGPT said: Anytime! I’ll be here when you’re ready to pick it up again. Thanks!

Here is how Grok answered that exact question

Here a "report" on how George Banks reacted when confronting the world of the risk weighted bank capital requirements.

Note: The answers are copied exactly from those given to me by ChatGPT

Here my many other questions to ChatGPT – Grok on bank regulations

Is it possible to describe current banking as a joint venture between bank regulators and financial engineers?

I asked ChatGPT: Consider banks having to hold e.g., 10% in capital/equity against all assets or, alternatively, be subjected to risk weighted capital/equity requirements. Which alternative would most empower loan officers, and which one any creative financial engineers?

This is what it said:

I asked ChatGPT: Consider banks having to hold e.g., 10% in capital/equity against all assets (leverage ratio) or, alternatively, be subjected to risk weighted capital/equity requirements. Which alternative would empower and generate more jobs for bank regulators and bank supervisors? 

This is what it said:

And so I have to ask, over the last decades, does banking not seem like a joint venture between its regulators, and the capital/equity minimizing – leverage maximizing creative financial engineers?

Though I’m quite sure it was not purposely planned so, the incentives provided by the risk weighted bank capital/equity requirements to both regulators and the financial engineers have, unwittingly but de facto, created a joint venture between regulators and financial engineers.

All us other, we’ll pay dearly for that. In way too many ways.

#AI #OpenAI #ChatGPT: Can bank regulations empower differently loan officers and financial engineers?

I asked ChatGPT:

Consider banks having to hold e.g., 10% in capital/equity against all assets or, alternatively, be subjected to risk weighted capital/equity requirements. Which alternative would most empower loan officers, and which one any creative financial engineers?

ChatGPT answered:

Let's break down the two alternatives and their implications for loan officers and financial engineers:

1. Fixed Capital/Equity Requirement (e.g., 10% for all assets)

Under this system, banks must hold a fixed percentage of capital against all their assets, regardless of the risk level of those assets.

Implications:Loan Officers: This system could empower loan officers because it simplifies the lending process. They would not need to consider complex risk weightings for different types of loans and assets. Instead, they could focus on originating loans without having to navigate a complicated regulatory framework.

Financial Engineers: This system is less favorable for financial engineers because there is limited scope for arbitrage or optimization. The simplicity of the rule means fewer opportunities to manipulate capital structures or asset classifications to reduce capital requirements.

2. Risk-Weighted Capital/Equity Requirements

Under this system, banks must hold capital based on the risk level of their assets. Higher-risk assets require more capital, while lower-risk assets require less.

Implications: Loan Officers: This system might constrain loan officers more because they would need to be aware of the risk weightings assigned to different assets. It could complicate the lending process and potentially limit the types of loans they can offer without incurring higher capital charges.

Financial Engineers: This system empowers financial engineers. They can devise strategies to minimize capital requirements by structuring assets and liabilities in ways that optimize risk-weighted calculations. This could involve creating complex financial products or finding ways to reclassify assets to achieve lower capital charges.

Summary:

Empowerment of Loan Officers: A fixed capital/equity requirement (e.g., 10%) would likely be more empowering for loan officers as it simplifies the lending process and reduces the need to navigate complex risk assessments.

Empowerment of Financial Engineers: Risk-weighted capital/equity requirements would provide more opportunities for financial engineers to apply their skills in optimizing the bank's capital structure and creating innovative financial products.

Overall, a fixed capital/equity requirement benefits loan officers by providing simplicity and clarity, while risk-weighted requirements benefit financial engineers by offering opportunities for creative financial structuring.

I finalized with: Thanks!

ChatGPT replied: You're welcome! If you have any more questions or need further clarification on any topic, feel free to ask.

Note: The answers are copied exactly from those given to me by OpenAI

Here my many other questions to ChatGPT – OpenAI on bank regulations

PS. In 2003, at the World Bank I opined: "A mixture of thousand solutions, many of them inadequate, may lead to a flexible world that can bend with the storms. A world obsessed with Best Practices [ bank regulations] may calcify its structure and break with any small wind."

PS. Another early opinion on risk management: In "Against the Gods" Peter L. Bernstein writes that the boundary between the modern times and the past is the mastery of risk, since for those who believe that everything was in God’s hands, risk management, probability, and statistics, must have seemed quite irrelevant. Today, when seeing so much risk managing, I cannot but speculate on whether we are not leaving out God’s hand, just a little bit too much.

PS. 2004 at the World Bank: “I believe that much of the world’s financial markets are currently being dangerously overstretched, through an exaggerated reliance on intrinsically weak financial models, based on very short series of statistical evidence and very doubtful volatility assumptions” Two decades later that has gotten only so much worse. 

#AI ChatGPT – Open AI. Analyzing the implications of dividing a bank’s total reported assets with its reported risk weighted assets.

I asked OpenAI:

"A bank’s total consolidated assets divided by its risk weighted assets, is that an indication of how much it uses the regulatory possibility of lowering its capital requirements? Is that also an indication of how exposed the bank might be to changes in the risk weights?"

OpenAI answered: 

"The ratio of a bank's total consolidated assets to its risk-weighted assets, known as the leverage ratio or capital adequacy ratio, is not directly indicative of how much a bank uses the regulatory possibility of lowering its capital requirements. The leverage ratio is primarily a measure of a bank's capital strength and its ability to absorb potential losses.

The leverage ratio is designed to provide a simple, non-risk-weighted measure of a bank's capital adequacy, acting as a backstop to the risk-weighted capital requirements. It serves as a safeguard against excessive leverage and provides a minimum level of capital that banks must maintain regardless of the risk profile of their assets.

Banks can potentially manage their capital requirements by adjusting their risk-weighted assets through various means, such as altering their asset composition or engaging in risk mitigation strategies. These actions can impact a bank's risk-weighted assets and, in turn, affect its capital requirements. However, the leverage ratio itself does not directly capture the extent to which a bank actively seeks to lower its capital requirements.

Regarding the exposure to changes in risk weights, the leverage ratio provides some indication of a bank's resilience to changes in risk weights. Since the leverage ratio does not consider risk-weighted assets, it is less affected by changes in the risk weights assigned to different asset classes. Therefore, a higher leverage ratio may suggest that a bank is relatively less exposed to changes in risk weights since its capital adequacy is not directly influenced by those changes.

However, it's important to note that changes in risk weights can still impact a bank's overall risk profile, asset quality, and capital requirements under the risk-weighted capital framework. The leverage ratio alone may not provide a comprehensive assessment of a bank's exposure to changes in risk weights. It is essential to consider other factors, such as the composition of a bank's asset portfolio, risk management practices, and overall risk appetite, to evaluate its vulnerability to changes in risk weights."

I asked OpenAI:

"I’m not referring to the leverage ratio but simply to dividing a bank’s total reported consolidated assets by its reporter risk weighted assets."

OpenAI answered: 

"Apologies for the misunderstanding. If you divide a bank's total reported consolidated assets by its reported risk-weighted assets, it would give you a measure known as the asset leverage ratio.

The asset leverage ratio is a metric that shows the proportion of a bank's total assets (on a consolidated basis) in relation to its risk-weighted assets. It can provide some insights into the extent to which a bank utilizes the regulatory possibility of lowering its capital requirements.

A lower asset leverage ratio suggests that a bank has a relatively smaller proportion of reported assets compared to its risk-weighted assets. This could indicate that the bank is using the regulatory flexibility to reduce its capital requirements. By adjusting its reported assets, a bank may effectively lower the denominator (risk-weighted assets) and, therefore, its required capital.

However, it's important to note that the asset leverage ratio alone does not provide a complete picture of a bank's capital management strategies or its level of regulatory capital optimization. Other factors, such as risk management practices, balance sheet composition, off-balance sheet exposures, and regulatory guidelines, can also influence a bank's capital requirements.

Furthermore, a low asset leverage ratio may not necessarily imply that a bank is excessively utilizing regulatory capital optimization. It could be a result of various factors, including the bank's risk profile, business model, and asset quality.

In summary, while the asset leverage ratio can provide some indication of a bank's utilization of regulatory capital flexibility, it should be interpreted alongside other factors and metrics to gain a comprehensive understanding of a bank's capital management practices and its exposure to changes in risk weights."

I asked OpenAI:

"Start by simply dividing a bank’s total reported consolidated assets by its reported risk weighted assets. Would the result not be an indication of how much it uses the regulatory possibility of lowering its capital requirements? Would the result not also be an indication of how exposed the bank might be to increased capital requirements, if the risk weights of the assets it holds increase? "

OpenAI answered: 

"Apologies for the confusion. When you divide a bank's total reported consolidated assets by its reported risk-weighted assets, the result would be a ratio that indicates the bank's leverage, often referred to as the leverage ratio.

The leverage ratio alone does not provide a direct indication of how much a bank uses the regulatory possibility of lowering its capital requirements. The leverage ratio primarily reflects the relationship between a bank's total assets (on a consolidated basis) and its risk-weighted assets, without considering the specific regulatory requirements or actions taken by the bank to adjust its capital requirements.

A lower leverage ratio suggests that a bank has a smaller proportion of reported assets relative to its risk-weighted assets. While it may indicate a potential utilization of regulatory flexibility to lower capital requirements, it does not provide a definitive measure of the extent to which a bank is actively using such possibilities.

Similarly, the leverage ratio does not solely indicate a bank's exposure to increased capital requirements if the risk weights of its assets increase. Changes in risk weights can indeed impact a bank's risk-weighted assets and, consequently, its leverage ratio. However, the leverage ratio does not capture the full picture of a bank's capital adequacy or its ability to adapt to changes in risk weights.

To assess a bank's exposure to increased capital requirements due to changes in risk weights, one should consider various factors such as the composition of the bank's asset portfolio, risk management practices, and the potential impacts of changes in risk weights on its overall risk profile.

In summary, while the leverage ratio can provide some indications about a bank's capital structure, it should be considered alongside other metrics and factors to fully understand a bank's utilization of regulatory possibilities and its exposure to changes in risk weights."

I asked OpenAI:

"Start by simply dividing a bank’s total reported consolidated assets by its reported risk weighted assets. Do not confuse it with a leverage ratio which has to do with debt to asset ratio. The mentioned simple division would it not be an indication of how much the bank uses the regulatory possibility of lowering its capital requirements? Would the result not also be an indication of how exposed the bank might be to increased capital requirements, in the case the risk weights of the assets it holds increase?"

OpenAI answered: 

"Apologies for the confusion earlier. When you divide a bank's total reported consolidated assets by its reported risk-weighted assets, the result would indeed provide an indication of how much the bank uses the regulatory possibility of lowering its capital requirements.

A lower ratio of total reported consolidated assets to risk-weighted assets suggests that the bank has a smaller amount of reported assets compared to its risk-weighted assets. This could indicate that the bank is utilizing the regulatory flexibility to lower its capital requirements.

By adjusting the reported assets, a bank can effectively reduce the denominator (risk-weighted assets) and, consequently, lower its required capital. This can be achieved through various means, such as securitization, off-balance-sheet transactions, or other capital optimization strategies allowed by regulations.

Conversely, a higher ratio of total reported consolidated assets to risk-weighted assets may suggest that the bank is utilizing less of the regulatory possibility to lower its capital requirements. In this case, the bank would have a larger amount of reported assets relative to its risk-weighted assets.

Additionally, the ratio of total reported consolidated assets to risk-weighted assets can also provide an indication of how exposed the bank might be to increased capital requirements if the risk weights of its assets were to increase. If the risk weights of the bank's assets were to rise, the bank's risk-weighted assets would increase, potentially leading to higher capital requirements.

A higher ratio would indicate that the bank has a larger amount of reported assets compared to its risk-weighted assets. Therefore, an increase in risk weights would have a relatively larger impact on the bank's risk-weighted assets, potentially necessitating an increase in capital to maintain regulatory compliance.

In summary, dividing a bank's total reported consolidated assets by its reported risk-weighted assets provides an indication of how the bank uses the regulatory possibility to lower its capital requirements. It can also give an indication of the bank's potential exposure to increased capital requirements if the risk weights of its assets were to increase."

I asked OpenAI:

"Is it not a higher ratio of total reported consolidated assets to risk-weighted assets suggests that would suggest a higher use of the regulatory flexibility to lower its capital requirements?"

OpenAI answered: 

"Apologies for the confusion in my previous response. You are correct. A higher ratio of total reported consolidated assets to risk-weighted assets would suggest a higher use of the regulatory flexibility to lower a bank's capital requirements.

When the ratio of total reported consolidated assets to risk-weighted assets is higher, it means that the bank has a larger amount of reported assets relative to its risk-weighted assets. This indicates that the bank's reported assets are relatively higher in proportion to the amount of capital it needs to hold based on the riskiness of its assets.

A higher ratio implies that the bank is utilizing the regulatory flexibility to lower its capital requirements. By adjusting its reported assets, the bank effectively reduces the denominator (risk-weighted assets) in the capital adequacy calculation, resulting in a lower required capital amount.

This use of regulatory flexibility can be achieved through various methods, such as securitization, off-balance-sheet transactions, or other capital optimization strategies that are permissible under regulations.

Therefore, a higher ratio of total reported consolidated assets to risk-weighted assets is indeed an indication of a bank utilizing the regulatory possibility to lower its capital requirements. It suggests that the bank has a higher level of reported assets in relation to its risk profile, potentially resulting in lower capital requirements.

Thank you for clarifying, and I apologize for any confusion caused by my previous response."

I asked OpenAI:

"So, in conclusion, it would also indicate the bank would be more exposed to increased capital requirements, in the case the risk weights of the assets it holds increase?"

OpenAI answered: 

"Yes, you are correct. A higher ratio of total reported consolidated assets to risk-weighted assets would suggest that the bank is more exposed to increased capital requirements if the risk weights of its assets were to increase.

When the risk weights of a bank's assets increase, the risk-weighted assets component of the ratio would also increase. If the ratio of total reported consolidated assets to risk-weighted assets is higher, it means that the bank has a larger amount of reported assets compared to its risk-weighted assets.

In this scenario, an increase in risk weights would have a relatively larger impact on the bank's risk-weighted assets, potentially necessitating a higher capital requirement to maintain regulatory compliance. The bank's capital base, as represented by the reported consolidated assets, would be a smaller proportion of the increased risk-weighted assets.

Therefore, a higher ratio indicates that the bank has a relatively smaller capital buffer to absorb the impact of increased risk weights. This suggests that the bank may be more exposed to increased capital requirements and would need to raise additional capital or adjust its asset composition to meet the new regulatory standards.

In summary, a higher ratio of total reported consolidated assets to risk-weighted assets indicates a higher use of regulatory flexibility to lower capital requirements. However, it also implies that the bank would be more exposed to increased capital requirements if the risk weights of its assets were to increase."

I told OpenAI:

"Thanks"

OpenAI answered: 

"You're welcome! If you have any more questions, feel free to ask. I'm here to help!"

Note: The answers are copied exactly from those given to me by OpenAI

Here my many other questions to ChatGPT – OpenAI on bank regulations

My tweets on “How the Basel Committee doomed our bank systems and our economies”

The Basel Committee doomed our bank systems and our economies.

For around 600 years risk adverse bankers had, not always successfully, tried to do their best to clear for perceived credit risks, by means of risk adjusted interest rates and the size of bank exposures. 

When what bankers had perceived as risky turned out to be even more risky, since the exposures were generally quite small, it hurt but banks could manage. 

When what bankers perceived as safe turned out to be risky, since the exposures were then very large, big crises often ensued. 

But then, starting in 1988 with Basel I, and really exploding in 2004 with Basel II, risk adverse regulators decided they also wanted to clear for those same perceived credit risks, and to that effect introduced risk weighted bank capital requirements.

In the softest words I can muster, that was extremely dumb. As bank supervisors they should be almost exclusively concerned with bankers not perceiving the credit risks correctly. Instead they bet our bank systems on that bankers would perceive credit risks correctly.

Banks everywhere were then taken out of the hands of savvy loan officers, and placed in the hands of creative equity minimizing financial engineers, who then ably marketed the nonsense that more bank capital hindered bank lending and was therefore bad for the real economy 

The 2008 crisis caused by AAA rated securities backed with mortgages to the US subprime sector, with which European banks and US investment banks were allowed to leverage 62.5 times with these, should have loudly reminded them about the dangers of the “safe”. 

But regulators refused to admit their mistake and kept risk weighting in Basel III.

The result is an ever increasing dangerous overcrowding of “safe harbors” and the abandonment of the “riskier oceans. “A ship in harbor is safe, but that is not what ships are for.” John A. Shedd.

And those who used to populated safe harbors, like insurance companies, pension funds, personal saving accounts and other, have been expelled to the risky oceans, confronting loans to leveraged corporates, emerging markets and others for which they're less prepared than bankers

To sum it up, risk-weighted bank capital requirements guarantees especially large crises, resulting from especially large exposures to what’s perceived especially safe, and is held against especially little capital. 

Let’s get rid of these regulators… now!

http://perkurowski.blogspot.com/2016/04/here-are-17-reasons-for-why-i-believe.html

And not only are they dangerously bad regulators… by decreeing risk weights of 0% for the sovereign and 100% for the citizens, they also evidence being dangerous statist/communist regulators.

http://perkurowski.blogspot.com/2019/09/financial-communism.html

PS. My 2019 letter to the Financial Stability Board

PS. My 2019 letter to the IMF