Wednesday, November 25, 2015
Monday, November 23, 2015
Mr Stefan Ingves, Chairman of the Basel Committee. Basel III contains the same major design flaw of Basel I & II
Sunday, November 22, 2015
Saturday, November 21, 2015
Mr Mario Draghi. For Europe’s good, why not take a sabbatical year and do all it takes for you to understand the RWCR?
Mr Mario Draghi. For the good of Europe, why do you not take a sabbatical year to reflect on this? You said you were willing to do all it takes.
Wednesday, November 18, 2015
According to Winston Churchill I am clearly a fanatic “one who can't change his mind and won't change the subject.”
Failed bank regulators cuddled up for comfort in the bosom of Her Majesty’s “Why did no one see this coming?”
Monday, November 16, 2015
Jon Cunliffe, Deputy Governor for Financial Stability of the Bank of England spoke on November 15, 2015 about “The outlook for countercyclical macro prudential policy”
He began with: “It is an interesting experiment to think what Einstein might have accomplished had he chosen the world of economics rather than physics. Would he have brought to our world the same brilliant simplicity and achieved the same lasting change in our understanding?”
I have no idea what Einstein would have done in such case but I am absolutely certain about what he would not have done.
He would not have set up pro-cyclical credit risk weighted capital requirements for banks, those which are lower for what is perceived as safe than for what is perceived as risky; those which allow banks to leverage more with what is perceived as safe than what is perceived as risky; those which therefore allow banks to earn higher risk-adjusted returns on what is perceived as safe than on what is perceived as risky; those which therefore in Mark Twain’s supposed words make bankers lend you the umbrella even faster than usual when the sun is out and take it away even faster than usual when it looks like it is going to rain.
When times are rosy and so much can seem safe, then banks need to hold little capital and so when times get bad, and so much seems risky, then banks, on top of their difficulties must also come up with additional capital or shed assets. No Mr Cunliffe Einstein would never have done a stupid thing like that.
Einstein would also have understood that the safer an asset is perceived the larger is its potential to deliver those unexpected losses that bank equity is to serve as a buffer against. To set capital requirements based on the ex ante expected credit losses is as dumb as it gets.
And Einstein would of course, before regulating the banks have asked: “What is the purpose of banks?” And when stress-testing banks, besides looking at what is on their balance sheets, Einstein would also have looked at what is not and perhaps should be.
But come to think of it… you should not be an Einstein to get all this!
With respect to developing countercyclical macro prudential policy Cunliffe expresses “I have some sympathy of the ‘don’t do it at all’ approach.
Yes Mr. Cunlifee. The regulators have done more than enough damage as is. Just eliminate the re-clearing in the capital of the perceived credit risk that has already been cleared for with interest rates and the size of the exposure. Don’t you understand that any risk, even though perfectly perceived, leads to the wrong actions if excessively considered?
Tuesday, November 10, 2015
The reverse mortgage on the economy the baby boomers allowed will forever shame their intellectual elite
Sunday, November 8, 2015
Thomas Hoenig of the FDIC, please indicate your colleagues, the right non-Taliban way of regulating banks.
Just asking for 20-30 percent capital requirements for banks is just playing for the galleries.
PS. Personally I would gladly settle for a goal of 8-12% of capital against all assets thereby getting rid of the worst part of current regulations, namely how the risk-weighing distorts the allocation of bank credit. How to get there? I have my ideas and the one I most like is inspired by how Chile capitalized their banks in 1985.
#BoEOpenForum: What a great opportunity to make questions that have bothered me for over a decade, but which are never responded
Bank of England, how can you justify the pillar of current bank regulations that have emanated under the Basel Accord, the credit-risk weighted capital requirements for banks? More ex ante perceived credit risk, more capital (meaning mostly equity) – less risk, less capital.
Saturday, November 7, 2015
Current bank regulators have no moral right to address the misconduct of other in the financial sector.
Tuesday, November 3, 2015
Stupid bank regulators looked only at data about bank clients defaulting and not on data about why banks default
Sunday, November 1, 2015
Banks should allocate credit based on risk-adjusted return on equity, and not on regulatory required equity
To be in the company of fools might make you a less lonely fool, never a lesser fool.