My tweets to IMF and World Bank on risks and bank regulations during their Annual Meetings 2019
@IMFNews @WorldBank #IMFmeetings #WBGMeetings
The world needs the IMF and World Bank to hold a continuous and intensive back and forth debate, a give and take, on risk-taking.
“A ship in harbor is safe, but that is not what ships are for.” John A. Shedd.
The World Bank, as the world’s premier development bank should always make clear that risk taking is oxygen needed for moving forward.
And the IMF, as guardian of the world’s financial stability, is responsible for that risk taking not getting out of hands.
That debate has sadly not been forthcoming.
That resulted in the acceptance of the credit risk weighted bank capital requirements.
That introduced a regulatory risk aversion, dangerous both for the financial stability and for economic growth.
For financial stability, by creating excessive bank exposures to what’s perceived, decreed or concocted as especially safe, against especially little capital.
For the economy, by reducing the “risky” but vital SMEs’ and entrepreneurs’ access to bank credit.
A synchronized financialization:
"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 may calcify its structure and break with any small wind."
A synchronized disaster:
“Perceiving risks wrong: What happens when markets misprice risk?”
Wrong question! When markets see risks, it stays away
Correct question! “Perceiving safety wrong: What happens when markets (and regulators) misprice safety?
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