Monday, October 12, 2015

Fair and equitable growth has been made impossible by current bank regulations.

Even though banks already take into consideration the perceived credit risks when setting their interest rates and amount of exposure the regulators also use exactly the same perceived risk when setting the capital requirements.

And that means the banks’ sensitivity to perceived credit risk, is multiplied by two.

So what is perceived as safe will now mean doubly perceived as safe, and so it will have even more access to bank credit; and what is perceived as risky will now mean doubly perceived as risky, and so it will have even less access to bank credit.