When will judges in Europe or in America drag bank regulator X in front of a court, in order to ask these questions?

Judge: Is bank capital to be there primarily to cover for unexpected losses?

The regulators’ expected answer: “Yes your honor”

Judge: What has more potential to deliver unexpected losses that which is perceived as safe, or that that is perceived as risky?

The regulators’ expected answer… after a while: “Perhaps that which is perceived as safe your honor”

Judge: What has caused major bank crisis, excessive exposures to what was perceived as risky or excessive exposures to what was wrongly perceived as safe?

The regulators’ … after a while, in a very low voice: “The latter your honor”

Judge: So why have you imposed higher capital requirements for banks for what is perceived as risky than for what has perceived as risky?

The regulators’ possible answer: “That was not my idea your honor… it was probably some consultant, and it sounded so logical; more risk more capital - less risk less capital”

The judge: But don’t banks already consider credit risks when they set their interest rates and amounts of exposure?

The regulators’ possible answer: “Yes your honor but we want to be doubly sure they have the right incentives to avoid credit risks.”

Judge: Do you understand how that distorted the allocation of bank credit to the real economy and hindered the fair access to credit of those perceived as risky like SMEs and entrepreneurs?

The regulators’ possible answer: “Yes your honor but our responsibility was exclusively to the safety of the banks and not the real economy.”

Judge: Do you understand how many young persons could now go without a job in their whole lives only because of that distortion?

The regulators’ possible answer: “Your honor, my lawyers have advised me not to answer that.”