Pope Francis, please go and explain “The Parable of Talents” to the members of the Basel Committee

At the European Parliament, Pope Francis spoke of a need to reinvigorate Europe, describing the continent as a "grandmother, no longer fertile and vibrant" and saying it risked "slowly losing its own soul".

"The great ideas which once inspired Europe seem to have lost their attraction, only to be replaced by the bureaucratic technicalities of its institutions," he said.

Indeed, but what else can you expect when bank regulators bureaucrats instruct banks not to lend to what seems "risky", that which most often includes the new and the future. And that they do by allowing banks to leverage immensely their equity, as long as they keep to what’s seems absolutely safe, that which most often includes the old and the history.

Had these regulations been in place earlier, Europe would not have become “a beacon of civilization” as Pope Francis believes it still is. Now it is with sadness we see regulators turning out its lights.

Next time Pope Francis would do better going to the Basel in order to explain The Parable of Talents to the members of the Basel Committee, those who have now castrated the European banks.

Lights are being turned out in Europe

PS. And Pope Francis could also remind regulators of Pope John Paul II, in his Apostolic Letter "Novo Millennio Ineunte" saying: Our hearts ring out with the words of Jesus when one day, after speaking to the crowds from Simon's boat, he invited the Apostle to "put out into the deep" for a catch: "Duc in altum" (Lk 5:4). Peter and his first companions trusted Christ's words, and cast the nets. "When they had done this, they caught a great number of fish" (Lk 5:6).

God make us daring!

PS. Here my letter to the Financial Stability Board

God make us daring!

Update: In 2025 I dialogued with ChatGPT on risk aversion, bank regulation and the role that Christian churches should play

It opined: "Churches around the world could inject a much-needed ethical dimension into a conversation dominated by technical and economic considerations."

Original post

GOD MAKE US DARING!

Matthew 17:7 Jesus came up, touched them, and said, “Get up; don’t be afraid.”

Matthew 14:26-27 When the disciples saw Jesus, walking on the lake, they were terrified. It’s a ghost,” Jesus said: “Take courage! It is I. Don’t be afraid”

"Be not afraid. Open wide the doors to Christ." Pope John Paul 1978

The Western World was built-up with a lot of risk-taking but, 1988, one year before the fall of the Berlin Wall, its  regulators, with risk weighted bank capital requirements, imposed on its banks a dangerous risk aversion.

A Swedish psalm 288 Text: F Kaan 1968 B G Hallqvist 1970

Gud, från ditt hus, vår tillflykt, du oss kallar

ut i en värld där stora risker väntar.

Ett med din värld, så vill du vi skall leva.

Gud, gör oss djärva!

“God, from your house, our refuge, you call us

out to a world where many risks await us. 

As one with your world, you want us to live.

God make us daring!”

“God make us daring!” That is indeed a prayer that the regulators in the Basel Committee for Banking Supervision do not even begin to understand the need for.

The Parable of Talents

In 2000, Pope John Paul II reminded us that Jesus Christ invited the Apostle to "put out into the deep" for a catch: "Duc in Altum" (Lk5:2) "When they had done this, they caught a great number of fish" (Lk5:6). That's something regulators should remember when, with their risk weighted capital requirements, they want our banks to fish only from “safe” shores.

And Pope Francis addressing the European Parliament in 2014, might have delicately phrased its risk-aversion with: “In many quarters we encounter a general impression of weariness and aging, of a Europe which is now a “grandmother”, no longer fertile and vibrant. As a result, the great ideas which once inspired Europe seem to have lost their attraction, only to be replaced by the bureaucratic technicalities of its institutions”

“A ship in harbor is safe, but that is not what ships are for.” John A Shedd.

“A decline in courage is particularly noticeable among the ruling and intellectual elites, causing an impression of a loss of courage by the entire society. There remain many courageous individuals, but they have no influence.” Alexander Solzhenitsyn's Commencement Address, Harvard University, 1978

In “Against the Gods” Peter L. Bernstein writes that the boundary between the modern times and the past is the mastery of risk, since for those who believe that everything was in God’s hands, risk management, probability, and statistics, must have seemed quite irrelevant. Today, when seeing so much risk managing, I cannot but speculate on whether we are not leaving out God’s hand, just a little bit too much.

And all for nothing! At the end of the day the current risk-weighted capital requirements for banks guarantees especially large bank crises, caused by especially large exposures to something ex ante perceived, decreed or concocted as especially safe, and which ex post turns into being especially risky, while being held against especially little capital.

Here is a letter to the Financial Stability Board

Here is a letter to the IMF

Here is an aide-mémoire on what is so wrong with the current risk weighted capital requirements for banks.

And here is #AI, trained on human intelligence, opining on regulatory risk aversion.