Unless they’re idiots, bank regulators, the Basel Committee, are total lunatics. You pick! To me they're both!

Regulators, like those of the Basel Committee and the Financial Stability Board, allow banks to hold much less equity when lending to a sovereign than when lending to a small businesses or an entrepreneur.

With that they are explicitly telling us they believe a government bureaucrat knows much more about how to deploy other peoples money efficiently for the society, than what the small business or the entrepreneurs know when they invest in their own projects… and, if so, I hold that to be sheer lunacy.

Of course, that is unless the regulators believe that the sovereigns are truly less risky for banks (and society) because sovereigns can always pay by collecting more in taxes, or having central banks print money… in which case it is pure idiocy.

Have your pick! Personally I think they have a lot of both!