Comments on: Fed’s capital proposal not as tough as feared, may give U.S. banks advantage http://blogs.reuters.com/financial-regulatory-forum/2011/12/22/feds-capital-proposal-not-as-tough-as-feared-may-give-u-s-banks-advantage/ Fri, 19 Apr 2013 00:29:31 +0000 hourly 1 http://wordpress.org/?v=3.4.2 By: PerKurowski http://blogs.reuters.com/financial-regulatory-forum/2011/12/22/feds-capital-proposal-not-as-tough-as-feared-may-give-u-s-banks-advantage/comment-page-1/#comment-7777 PerKurowski Fri, 23 Dec 2011 12:49:46 +0000 http://blogs.reuters.com/financial-regulatory-forum/?p=8869#comment-7777 Basel I, II and III all presuppose that ex-ante risk perceptions are correct and therefore, by means of low risk-weights, allow for very little bank capital when lending to what is perceive as “not-risky”… like triple-A rated securities and infallible sovereigns! That is loony because there has never ever been a bank crisis resulting from excessive exposure to what ex-ante is perceived as risky… they all have resulted from excessive exposures to what ex-ante was perceived as absolutely not risky. When will the regulators understand that their duty is to regulate for the possibility that the ex-ante perceptions about risk-turn out to be wrong? If the moderator allows it here is a video that explains how the regulators rewarded the banks for not taking risks and thereby caused the safe-havens to be dangerously overcrowded http://bit.ly/dFRiMs Basel I, II and III all presuppose that ex-ante risk perceptions are correct and therefore, by means of low risk-weights, allow for very little bank capital when lending to what is perceive as “not-risky”… like triple-A rated securities and infallible sovereigns!

That is loony because there has never ever been a bank crisis resulting from excessive exposure to what ex-ante is perceived as risky… they all have resulted from excessive exposures to what ex-ante was perceived as absolutely not risky.

When will the regulators understand that their duty is to regulate for the possibility that the ex-ante perceptions about risk-turn out to be wrong?

If the moderator allows it here is a video that explains how the regulators rewarded the banks for not taking risks and thereby caused the safe-havens to be dangerously overcrowded http://bit.ly/dFRiMs

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