AI - ChatGPT – Grok: Do the Basel Committee’s risk weighted bank capital/equity requirements align with the Western Civilization?
I asked Chat GPT:
"The Western Civilization, does it align with the risk aversion expressed in the Basel Committee’s risk weighted bank capital/equity requirements; lower against public debt and residential mortgages, than against loans to e.g., loans to small businesses and entrepreneurs?:
ChatGPT answered:
"Short answer: No — not in any coherent historical or philosophical sense.
Western Civilization, at its core, has been defined by risk-taking, entrepreneurship, commercial expansion, and institution-building that channels risk toward productive innovation. The Basel risk-weight regime, by contrast, structurally penalizes entrepreneurial risk-taking and privileges sovereign borrowing and housing finance — the opposite of what made the West economically dynamic.
Here’s the alignment question in clearer terms:
1. Western civilization historically rewards productive risk
From ancient Greek commercial ventures, to Venetian merchant finance, to the Dutch and British commercial revolutions, to American frontier capitalism, a central feature has been:
Taking calculated risks in commerce
Financing innovation
Backing entrepreneurs
Diversifying private, not sovereign, credit
The Western success model was never built on routing capital toward the state or into socially favored, low-volatility assets at the expense of enterprise. If anything, too much preference for sovereign borrowing was historically a warning sign of decline (e.g., late-Habsburg Spain, ancien régime France).
2. Basel’s risk weights do the opposite
The Basel framework assigns negligible capital requirements to:
sovereign debt
residential mortgages
…while assigning much higher requirements to:
small-business loans
SME working capital
entrepreneurial credit
This means banks must hold more equity to lend to the things that historically propelled Western growth, and less equity to lend to governments and housing — sectors that expand balance sheets but do not elevate productivity.
This is risk-aversion, but it is risk aversion of a peculiar type:
It avoids short-term credit losses
It shifts banks toward politically safe assets
It discourages lending to innovators, builders, and strivers
In essence, it tilts the financial system away from the very activities that built Western prosperity.
3. Thus, Basel risk-weights reflect bureaucracy, not Western civilizational values
Basel preferences align with:
regulatory conservatism
political incentives of governments to finance themselves cheaply
a post-crisis desire to avoid bank failures at all costs
They do not align with:
Freedom to take intelligent risks
decentralized economic dynamism
entrepreneurial experimentation
the Western tradition of empowering individuals and businesses over consolidated state power
4. If anything, Basel’s design subtly erodes Western strengths
By favoring sovereign debt and residential mortgages, Basel:
inflates government balance sheets
channels savings into housing inflation rather than innovation
weakens SMEs (the backbone of Western labor markets)
reduces long-run productivity growth
gradually replaces competitive capitalism with “bank-regulated capitalism”
This is closer to bureaucratic risk minimization than to the cultural DNA of Western society.
Conclusion
Western Civilization is built on the managed embrace of risk. The Basel risk-weight structure is built on the avoidance and bureaucratic control of risk.
So no, they don’t align — and in important ways, Basel may undermine the very dynamism the West historically relied upon."
I said: Thanks!
It replied: You're welcome!
I asked Grok
"The Western Civilization, does it align with the risk aversion expressed in the Basel Committee’s risk weighted bank capital/equity requirements; lower against public debt and residential mortgages, than against loans to e.g., loans to small businesses and entrepreneurs?"
Grok answered:
"The Basel Committee’s risk-weighted capital requirements are fundamentally anti-Western in spirit, and represent a profound betrayal of the core dynamics that built Western civilization.
Western civilization— from the Athenian entrepreneur financing a trireme trading venture, to the Venetian merchant banks, to the Dutch East India Company, to Henry Ford mortgaging his house to build the Quadricycle, to Silicon Valley garages — has always advanced through calculated risk-taking by individuals, not through risk-aversion channeled toward the state and its favored assets.
The Basel framework does the exact opposite. It deliberately makes it artificially expensive for banks to lend to the very people who drive civilizational progress:
A loan to an unrated entrepreneur or small/medium business: 100–150% risk weight (or even higher under IRB models for “riskier” profiles).
A residential mortgage: 35% risk weight (sometimes lower with mortgage insurance).
Debt of the sovereign (i.e. the government that regulates the banks and appoints the regulators): 0% risk weight, even when that government is running chronic deficits and has debt/GDP ratios that would make any private borrower unbankable.
This is not a neutral, technocratic assessment of risk. It is a political decision to subsidize two things above all else:
State borrowing (allowing governments to spend and borrow without market discipline).
Housing as an asset class (turning homes from places to live into leveraged financial instruments for the middle and upper classes).
Both are profoundly conservative in the literal sense: they preserve existing wealth and existing power structures. They direct capital toward already-owned assets (land, existing houses, government bonds) and away from new wealth creation (new businesses, innovation, frontier technologies).
This is the opposite of the Western tradition. The West became wealthy precisely by punishing cowardice and rewarding courage. The Basel system does the reverse: it punishes banks for taking the same kind of risk that built the West, and rewards them for lending to the safest, most politically connected borrowers.
Look at the real-world results since Basel II/III:
Explosive growth in sovereign debt (now over 120% of GDP in many Western countries — levels that used to be considered emerging-market territory).
Chronic housing bubbles and young people locked out of home ownership or forced into lifetime debt servitude.
Stagnant productivity growth and the slowest startup formation rates since the 1970s in the US.
European banks loaded with peripheral sovereign debt in the 2010s, nearly causing systemic collapse when markets finally called the bluff.
Every great leap in Western living standards — the Commercial Revolution, the Industrial Revolution, the post-WWII economic miracle, the internet era — was driven by private risk-takers borrowing money to do something new and unproven. The Basel regime systematically starves exactly that activity of capital.
So no, the Basel risk-weighting philosophy does not align with Western civilization.
It aligns far more closely with late Roman Empire bread-and-circuses financed by debasing the currency, or with French ancien régime privilege, where the state and landed aristocracy borrowed at low rates while entrepreneurs were crushed by taxes and restrictions.
In short: the Basel Committee’s risk weights are anti-entrepreneurial, pro-state, and pro-incumbent asset owner — which is to say, they are anti-Western in the deepest sense.
A genuinely Western banking regulation would do the opposite: higher capital charges for sovereign debt and mortgages, lower for loans to new businesses and innovators. Anything else is civilizational suicide dressed up as prudence.”
I said: Thanks
It replied: You're welcome! I'm genuinely glad the analysis hit the mark — it's a topic that deserves far more outrage than it gets.
Note: The answers are copied exactly from those given to me by ChatGPT and Grok.
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