What would Le Vieux Lion Winston Churchill had said about the bank regulators in the Basel Committee?

These regulators bribe the banks by means of ultra-low capital requirements to go where their official risk perceivers, the credit rating agencies, perceive the risks of default to be low, and to avoid like a plague servicing the needs of the risk-taking small businesses and entrepreneurs upon whom Europe´s greatness and future jobs depends?

You wimps!?

Per Kurowski’s quiz for the candidates to Managing Director of the IMF

Q1. Which type of bank clients can generate such a massive exposure so as to trigger a systemic bank crisis?

a. Those perceived as risky (small businesses and entrepreneurs)

b. Those perceived as not risky (triple-A rated)

Q2. The needs of which clients do we most expect our banks to attend to?

a. Those perceived as risky with no access to capital markets (small businesses and entrepreneurs)

b. Those perceived as not risky and with access to capital markets (triple-A rated)

Q3. The Basel Committee allows for much lower capital requirements for banks (five times less) when lending to those perceived as not risky (triple-A rated). Based on your previous answers, which would be your most likely opinion?

a. I fully agree with the Basel Committee

b. The Basel Committee might have got it all completely upside down.

Note: The responses of “b, a, and b” would qualify the candidate to proceed to further tests.

TWO EXAMS

The bank regulator’s exam

1. Which type of bank clients can create such a massive exposure so as to generate a systemic bank crisis?

a. Those perceived as risky (small businesses and entrepreneurs)

b. Those perceived as not risky (triple-A rated)

2. The needs of which clients do we most expect our banks to attend to?

a. Those perceived as risky with no access to capital markets (small businesses and entrepreneurs)

b. Those perceived as not risky and with access to capital markets (triple-A rated)

The bank regulators, represented by those in the Basel Committee answered (a) to the first question, and totally ignored the second. As a consequence they imposed higher capital requirements on banks when lending to client “officially” perceived as riskier, and vice versa.

Our exam

1. How did the bank regulators do?

a. They failed miserably

b. They excelled!

2. If your answer is (a) but we are yet leaving our regulations in the hands of exactly the same regulators what does that say about us?

a. We’re stupid

b. We’re smart

Our crazy bank regulations explained in red and blue

Nannies care for risks perceived, regulators should care for the risks not perceived. So you tell me, the Basel Committee, the FSA and the FSB, what are they?

2003: During many days I’ve not heard a single word indicating that growth and credits, are also a function of bank regulations.

2009: Please free us from imprudent risk aversion and give us some prudent risk taking

2023: Chatting with AI – Open AI – ChatGPT, about the kind of credit diet, nutrients, banks should feed the economy.

How sad bank regulators didn’t listen to Pope John Paul II

The Basel Committee for Banking Supervision, and other assorted bank regulators, decided to increase the risk-adverseness of banks by imposing on them capital requirements based on officially perceived risk, among other as perceived by some few officially appointed risk-perceivers, the credit rating agencies.

And, naturally, if when doing so one favors the financing of houses, public debt and whatever has managed to temporarily hustle up a good credit rating, and discriminate against all of what is officially perceived as “risky”, like small businesses and entrepreneurs, one will, naturally, end up with a lot of houses, dangerously excessive lending to what is triple-A rated, a huge public debt, and very few jobs which, to create, requires a lot of risk-taking.

How sad the regulators did not listen to Pope John Paul II when he said “Do not be afraid. Do not be satisfied with mediocrity. Put out into the deep and let down your nets for a catch.” "Duc in Altum"