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Risk taking is the oxygen of all development. God make us daring

Friday, October 16, 2020 14:45

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Sir, I refer to Arvind Subramanian’s “Developing economies must not succumb to export pessimism” October 16.

In October 2007 at the High-level Dialogue on Financing for Developing at the United Nations, New York I presented a document titled “Are the Basel Bank Regulations Good for Development?”

Let me quote just two paragraphs from it:

“Credits deemed to have a low default or collection risk will intrinsically always have the advantage of being better perceived and therefore being charged lower interest rates, precisely because they are lower risk. But, the minimum capital requirements of the Basel regulations, by additionally rewarding “low risk” with the cost saving benefits resulting from lower capital requirements, are unduly leveraging the attractiveness of “low risk” when compared to “higher risk” financing.

It is very sad when a developed nation decides making risk-adverseness the primary goal of their banking system and places itself voluntarily on a downward slope, since risk taking is an integral part of its economic vitality, but it is a real tragedy when developing countries copycats that and falls into the trap of calling it quits.”

Risk taking is the oxygen of all development. God make us daring!

The risk weighted bank capital requirements represent a monstrous “intellectual dereliction of duty” and so is the continued silence on it by “Western economists, academics and policy advisors”

@PerKurowski

Source: http://teawithft.blogspot.com/2020/10/risk-taking-is-oxygen-of-all.html

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