Tuesday, August 16, 2016
Sir, by using risk weighted capital requirements you allow banks to leverage assets differently, something which influences differently the banks' risk-adjusted returns on equity. Don’t you think this could dangerously distort the so vital efficient allocation of bank credit to the real economy?
Sir, we see you have set a risk weight of only 20% for private assets rated AAA to AA; and one of 150% for those rated below BB-. Do you really believe that what is rated below BB- is more dangerous for the bank system than what is rated AAA to AA?
And when you then see him evading the issue by answering something else, then you have the right to know, as I do, that he and his colleagues have no idea about what they are doing… and are running scared people will find out.
PS. If you want further details on the bank regulatory monstrosity you can go HERE