Yes shame on the regulators! But also for some other reasons than those Cifuentes mentions.
Just for a starter, the credit rating agencies would never ever have caused so much damage had their opinions not been leveraged immensely by the risk weighted capital requirements for banks. Imagine, Basel II, 2004, allowed banks to leverage 62.5 times if only a human fallible credit rating agency assigned an asset an AAA rating.
It should have been crystal clear that with that the regulators were introducing a huge systemic risk in the banking sector. That I mentioned for instance in a letter published by FT in January 2003; and I loudly explained and protested it while an Executive Director in the World Bank during those Basel II preparation days.
In Europe, the EU authorities even overrode the credit rating agencies opinions and assigned Greece a 0% risk weight, which of course doomed it to its current tragic condition.
Then, let us mention the mother of all regulatory mistakes; for their risk weighted bank capital requirements, initiated in 1988 with Basel I, the regulators used the perceived risk of assets instead of the risks of those assets conditioned on how their risks are perceived? How loony, how sad, what a distortion, what a recipe for disaster was not that? And still, 30 years later, they do not even acknowledge their mistake.
By the way, when Cifuentes denounces that Solvency II, with its myopic risk view, will discourage insurance companies, the natural holders of illiquid assets, to hold these investments, and it will therefore increase the systemic risk by making their portfolios less diversified, I could not agree more.
Sir, you know that for over more than a decade I have written to Financial Times 2.787 letters objecting to the “subprime banking regulations”, this one not included. Galileo could indeed be accused for being obsessed with his theories, but, could those doing their utmost to silence his objections, the inquisitors, not be accused of the same?
@PerKurowski
Source:
http://teawithft.blogspot.com/2018/08/indeed-reforming-credit-rating-market.html
Please Help Support BeforeitsNews by trying our Natural Health Products below!
Order by Phone at 888-809-8385 or online at https://mitocopper.com M - F 9am to 5pm EST
Order by Phone at 866-388-7003 or online at https://www.herbanomic.com M - F 9am to 5pm EST
Order by Phone at 866-388-7003 or online at https://www.herbanomics.com M - F 9am to 5pm EST
Humic & Fulvic Trace Minerals Complex - Nature's most important supplement! Vivid Dreams again!
HNEX HydroNano EXtracellular Water - Improve immune system health and reduce inflammation.
Ultimate Clinical Potency Curcumin - Natural pain relief, reduce inflammation and so much more.
MitoCopper - Bioavailable Copper destroys pathogens and gives you more energy. (See Blood Video)
Oxy Powder - Natural Colon Cleanser! Cleans out toxic buildup with oxygen!
Nascent Iodine - Promotes detoxification, mental focus and thyroid health.
Smart Meter Cover - Reduces Smart Meter radiation by 96%! (See Video).
