J'accuse the Basel Committee for Banking Supervision

The following are facts that should be understood by any economist.

The Basel Committee’s risk weighted bank capital/equity requirements distort the allocation of credit.

By favoring the refinancing of the safer present, it builds up dangerous large exposures to what’s perceived or decreed safe e.g., public debt, residential mortgages and AAA rated securities.

By hindering the financing of the riskier future, e.g., loans to small businesses and entrepreneurs, the economy weakens and grows less.

These are extremely procyclical. When times are good and risk perceived low, banks are allowed to hold less equity, therefore able to pay much dividends and buy back shares. When times turn bad, banks stand there naked, just when its hardest for these to raise new equity.

As valiantly confessed by Paul Volcker the risk weights are much influenced by politics. 

The Nobel Prize in Economic Sciences has not been awarded to anyone who has warned or much less criticized this risk weighted regulations. As a very active member of the Basel Committee, Sveriges Riksbank that stands behind such prize, has a serious conflict of interest it has not been able to manage.

Could/would an Inquisition Tribunal nominate as a Nobel Prize winner in Physics, someone arguing a heliocentric world?

Why do I ask?

The Nobel Memorial Prize in Economic sciences is officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. The Governor of Sveriges Riksbank since 2006, is Stefan Ingves, and who, from 2011 to 2019 served as the Chairman of the Basel Committee on Banking Supervision. 

And the Church of the Basel Committee holds, as a dogma, with their credit risk weighted capital requirements, that even though never ever have those excessive exposures that caused bank crises been built up with what’s perceived as risky, but always with what was perceived as safe, that what is really dangerous to our bank systems, is what’s perceived as risky, or what has not been decreed by them as being very safe... like loans to governments.

So, could an economist who argues that what’s perceived as safe is much more dangerous to our bank systems than what's perceived as risky be nominated to such a Nobel Memorial Prize in Economic sciences?

You tell me.

My 2019 letter to the Financial Stability Board

PS: My recent chat with ChatGPT – OpenAI on the subject of geocentric vs heliocentric bank regulations.