How hard it is to explain the banks\’ effortless escape from any painful punishment or real reform to prevent them crashing the world economy again. Today\’s Financial Times reported the banks have escaped the modest Basel III requirement to hold 7% reserves against their lending. Instead they use risky \”hybrid capital and other debt-like instruments\” as surety – and the casino plays on, destined to crash again. Meanwhile, the banks are failing to keep a modest pledge to foster growth by lending more to business.
The higher you make the capital requirements then the lower will be bank lending. That\’s what it actually means.
So lowering the capital requirements means that banks can lend more. Which is what you claim to want.
You cannot have both: higher capital requirements and more lending. For the one precludes the other.
Y u no get this?
This is also pretty good:
Steve Brittan, of BSA Machine Tools Ltd, runs the kind of business that needs to grow to rebalance the economy away from finance. He makes customised machine tools mostly for export, employing 30 people in Birmingham. Between contract and delivery can take six to 12 months, so he needs and always used to get, working capital to finance the time from deposit to final payment. This is bog standard, non-risky everyday lending. But he can\’t get it, nor the bank\’s letters of credit that were once no problem.
So, we need to expand the finance sector to move the economy away from a reliance upon finance. Yes, very good.