How dumb can we allow our bank regulators to be?

The Financial Stability Board in its meeting on June 24, 2013 in Basel declared:

“Despite important progress in strengthening the resilience of the global financial system, some parts of the system remain in a state of incomplete repair. Some jurisdictions need to continue to improve the capitalisation of their banking systems.”

But, of course, not a word that it was them, and their chums at the Basel Committee who, with that mother of all bad inventions, namely the capital requirements for banks based on perceived risk, allowed the banks to explode their balance sheets on what was perceived as “absolutely safe” holding almost no capital; and completely ignoring the fact that all major bank crisis, no exclusions, have detonated because of excessive exposures to what was perceived as “absolutely safe”, but turned out not to be.

1.6 percent in capital, a 62.5 to 1 leverage when lending to Greece but 8 percent capital, five times less, a 12.5 to 1 leverage when lending to a German unrated entrepreneur. How dumb is one allowed to be?

These regulators should all be sent home… disgraced... and paraded with a dunce cap, a cone of shame, on their heads.

PS. This was written before I knew that EU authorities had assigned all eurozone sovereigns, including Greece, a 0% risk weight, which meant allowing infinite leverage.

PS. My letter to the Financial Stability Board

Struta alla medlemmar i Baselkommittén för banktillsyn - Dunce caps for the members of the Basel Committee

Baselkommittén för banktillsyns töntiga försök att hindra bankerna ta små ofarliga men för real ekonomin mycket viktiga risker med ”De Riskabla”, bara orsakar bankerna att ta fruktansvärda stora, farliga och oproduktiva risker med ”De Ofelbara”. Det är helt galet och vi borde struta alla Baselkommittens medlemmar.

The Basel Committee on Banking Supervision’s silly wish to prevent banks taking small harmless but for the real economy very important risks on "The Risky", just cause banks to take awful big, dangerous and unproductive risks on "The Infallible". It's crazy and we should all place a dunce cap on all the members of the Basel Committee.