There is a dangerous regulatory arbitrated run towards safety

Credits which are perceived as having a lower risk than others have a natural market advantage that translates into lower interest rates. But the bank regulations that have been developed by the Basel Committee on Banking Supervision, by applying minimum capital requirements based on the risks perceived by the credit rating agencies, have added through their regulatory arbitration an additional and artificial benefit that biases the market in favor of "low-risk" credits.

The above is producing a run towards either a more objectively "safe portfolio" or providing further stimulus for "risk-hiding". Since the largest needs for development do not ordinary make a living in the land of the low risks it is clear that development finance is the largest victim from this run and we could even say that the development power of the commercial banks in developing countries has as a result been severely diminished.

But also developed countries will pay for this, not only as already evidenced by the subprime-mortgage mess, but also since no society can survive as viable maximizing risk avoidance. As I see it our future generations will pay dearly for this baby-boomers invented run to safety.