Is it possible to describe banking as a joint venture between bank regulators and financial engineers?
I asked ChatGPT: Consider banks having to hold e.g., 10% in capital/equity against all assets (leverage ratio) or, alternatively, be subjected to risk weighted capital/equity requirements. Which alternative would empower and generate more jobs for bank regulators and bank supervisors?
So I ask, over the last decades, does banking not seem like a joint venture between its regulators, and capital/equity minimizing – leverage maximizing creative financial engineers?
Though I’m sure it was not purposely planned so, the incentives provided by risk weighted bank capital/equity requirements to both regulators and financial engineers have, unwittingly but de facto, created a joint venture between regulators and financial engineers.
All us other, we’ll pay dearly for that. In way too many ways.
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