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We might need to parade current bank regulators down our avenues wearing cones of shame.

Monday, March 4, 2019 14:46

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Sir, Patrick Jenkins writes: “Bill Coen, secretary-general of the Basel Committee on Banking Supervision… said auditors should be given responsibility for checking banks’ calculations [so as to have] another line of defence to ensure assets are [given] the proper risk weighting”, “Metro Bank sparks call for external checks on loan risks” February 4.

I totally disagree, auditors look at ex post realities, on what banks have already incorporated into their balance sheets, What most matters are the ex ante perceptions of risk.

Jenkins opines here “The error at Metro was to put some loans into standard risk-weighting buckets, determined by the UK regulator”. Sir, I ask, is that not evidence enough that we should get rid of current bank regulators?

If somebody is to blame, that is precisely the Basel Committee who with its risk weighted capital requirements for banks decided that what bankers perceived ex ante perceived as safe, was so much safer to our bank system than what they perceived as risky.

Basel Committee’s Bill Coen should be asked to explain the rationale of a standardized 20% risk weight for what, rated AAA, is dangerous to our bank systems, and 150% for what, rated below BB-, becomes so innocous.

Jenkins opines: “The error at Metro was to put some loans into standard risk-weighting buckets, determined by the UK regulator”. Sir, I ask, is that not evidence enough that it behooves us to hold our bank regulators very accountable, perhaps even by parading them down our avenues wearing cones of shame? Perhaps hand in hand with those unable or unwilling to question them.

@PerKurowski

Source: http://teawithft.blogspot.com/2019/03/we-might-need-to-parade-current-bank.html

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