Profile image
By Tea with FT (Reporter)
Contributor profile | More stories
Story Views

Last Hour:
Last 24 Hours:

World Bank’s “Ease of doing business” rankings, ignores the regulatory distortion of bank credit

Wednesday, October 19, 2016 21:57
% of readers think this story is Fact. Add your two cents.
Sir, Rachel Sanderson writes: “Competitiveness has improved… Last year Italy climbed nine places in the World Bank’s “ease of doing business” rankings”, “Italy’s business chiefs buckle up for a shock as reform vote looms” October 20.
That World Bank report, great in many ways, with respect to “getting credit” does unfortunately omit considering whether bank regulations distort the access to bank credit or not.
And so the real main-street value of any recorded “ease of doing business” improvements can come to naught, if, for instance SMEs and entrepreneurs do not have fair access to bank credit; something which they don’t have in Italy, or in any other country that has been smitten by the Basel Committee’s dangerous and foolish risk aversion.
The pillar of current bank regulations is the risk weighted capital requirements. It allows banks to leverage their equity and the support they receive from society differently depending on the ex ante perceived risk. Less risk, more leverage, higher risk adjusted returns on equity.
So the following risk weights should suffice to understand what is going on… that is if you want to understand.
Risk weights: Sovereign 0%, AAArisktocracy 20%, residential housing 35% and the unrated “risky” SMEs and entrepreneurs, the fundamental drivers of the economy, 100%. What more could I say? Perhaps reminding anyone interested that no major bank crisis ever has been caused by excessive exposures to something that was ex ante perceived risky when booked.
Had these regulation been in place when banks originally began to operate in Italy, none of them, and neither the economies, could have developed as they have. 600 years of real banking and soon 30 years of loony Basel 
@PerKurowski ©


We encourage you to Share our Reports, Analyses, Breaking News and Videos. Simply Click your Favorite Social Media Button and Share.

Report abuse


Your Comments
Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

Top Stories
Recent Stories



Top Global


Top Alternative




Email this story
Email this story

If you really want to ban this commenter, please write down the reason:

If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.