On the morality of current banker's decisions

A banker confronts a choice:

On one hand, Alt. A, a number of not so creditworthy borrowers who are asking for small loans, accepting to pay what could rightly be deemed a bit higher interest rate than what the risk adjusted interest rate should be.

On the other hand, Alt. B, a very creditworthy borrower, that is asking for a very large loan, at a rate lower than what an adequate risk adjusted interest rate should be.

Years ago, the banker would gladly gone for Alt. A, but, after the introduction of risk weighted bank capital requirements, which mean banks can leverage much more with what’s more creditworthy than with what’s less so, means the bank would obtain a higher risk adjusted return on its equity with Alt. B.

A banker has to pick Alt B. or he’s toast… and so he picks it… (that is unless he would not want to be a banker any more… and instead, like George Banks, go and fly a kite)

In reference to Per Bylund’s twitter thread on “morality of actions”, how would you classify the banker’s action.

Immoral, useless and outright dangerous; what more do you need to repel Basel bank regulations?

The fundamental pillar of the Basel Committee's bank regulations is capital requirements with risk-weights based on ex-ante perceived risk.

The way those capital requirements favor the access to bank credit of “The Infallible”, those already favored by markets and banks, and discriminate against that of “The Risky”, those already discriminated against by banks and markets… is immoral.

Those capital requirements are also useless, because they give banks incentives to stay away from taking manageable risks on “The Risky”, those who never ever caused a major bank crisis, and to instead take unmanageable risk on “The Infallible”, those who always have been the origin of all bank crises.

Those capital requirements are also outright dangerous, as these completely hinder the banks from performing an efficient economic resource allocation.

What more do you need to repel them?