Five sad musings on the current bank regulations autocratically dictated by central bankers.
It is so hard for me to muster enough interest about central bankers’ monetary policies, while they make these so ineffective by imposing regulations that dangerously distort the allocation of bank credit.
“Credit risk weighted bank capital (equity) requirements”
translates as
“Worthy of credit allowed bank capital (equity) leverages”
Their lower bank capital requirements when lending to the government than when lending to citizens, de facto implies bureaucrats know better what to do with credit they’re not personally responsible for than e.g. entrepreneurs... and so are more worthy of it.
Their lower bank capital requirements for banks when financing the central government than when financing local governments, de facto implies federal bureaucrats know much better what to do with credit than local bureaucrats... and so are more worthy of it.
Their lower bank capital requirements for banks when financing residential mortgages, de facto implies that those buying a house are more important for the economy than, e.g. small businesses and entrepreneurs... and so are more worthy of it.
Their lower bank capital requirements for banks when financing the “safer” present than when financing the “riskier” future, de facto implies placing a reverse mortgage on the current economy and giving up on our grandchildren’s future.
And all that for nothing. Those excessive bank exposures that could be dangerous to our bank systems are always built-up with assets perceived or decreed as safe, and never ever with assets perceived as risky.
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