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If only bank regulators had taken their clues from fixed odds betting terminal regulators.

Tuesday, October 16, 2018 10:46

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Sir, Henry Mance and Camilla Hodgson write about the reduction of The government announced last year that it would reduce “the maximum stake on fixed-odds betting terminals — such as roulette — from £100 to £2 to tackle problem gambling.” “Problem gambling shake-up set to be brought forward” October 15.

Of course that will operationally distort fixed odds betting terminal playing, slowing it down, but by keeping the odds as designed for the game, meaning every bet having exactly the same probability adjusted payout, it will not alter the nature of it.

We can only wish our current bank regulators had used a similar route because these, by allowing banks to leverage assets differently based on their perceived (or decreed) credit risk, actually determined that banks would obtain higher risk adjusted returns on equity on assets perceived as safe than on assets perceived as risky… and that has clearly distorted the whole nature of banks, when fulfilling their expected role of allocating credit efficiently to the real economy. How long would the game of roulette have survived such regulations?

In terms of betting on horses at the racetrack that would be like handicap officials taking off weights from the stronger and faster horses and placing these on the weaker slower ones. How long would horseracing tracks survive such distortions?

In terms of our ordinary golf that would be like handicap officials giving more strokes to the better players than to lousy players like me. How long would our golf clubs survive such distortion?

What’s going to happen to our bank systems? If these regulations persist, they are going to implode on some especially excessive exposures, to what is especially perceived (or decreed) as safe, against especially little capital. No doubt about it!

@PerKurowski

Source: http://teawithft.blogspot.com/2018/10/if-only-bank-regulators-had-taken-their.html

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