UN’s Sustainable Development Goals, SDGs, against the backdrop of the Credit Risk Weighted Capital Requirements for Banks

The fact is that current bank regulations, by allowing for lower capital requirements, allow banks to earn higher risk adjusted returns on equity when lending to what is perceived as safe than when lending to what is perceived as risky. 

That’s it! Just avoid taking credit risks and you earn more. Not a word about a purpose for banks; like helping to generate jobs for the young or making the planet more sustainable. So we have a banking system that no longer finances the future, it now only refinances the past.

And to top it up, the regulators assigned a risk weight of zero percent to the sovereigns (governments) and of 100 percent to the citizens and private sectors on which that sovereign depends. Which means they believe government bureaucrats can use bank credit more efficiently than SMEs and entrepreneurs.

And of course those regulations completely distort the allocation of bank credit to the real economy and, by diminishing the opportunities of the risky to gain access to bank credit, increases existing inequalities. 

And of course those purposeless bank regulations are also dangerously useless. We know that major bank crisis never occur because of excessive financing of what is perceived as risky; they always result from excessive financing of something erroneously believed to be very safe 

And not one iota about this is being discussed in the UN, IMF or elsewhere

Can you imagine if by allowing banks to hold less somewhat less equity when lending to what finances SDGs, we made banks earn higher returns on equity when financing SDGs?  

And so I am sorry, against this backdrop, the announcement of the Sustainable Development Goals, the SDGs, might suggest the term Pollyannaish should henceforth be spelled as PollyUNnaish.

PS. Volkswagen should have rudely reminded UN bureaucrats that there is a real world waiting out there to game their SDGs.