EU to deviate from Basel III accord

The Wall Street Journal has the report, linked here. Amazing is it not, that the EU, built on the supposed belief that compromise and community of interests provides the solution to all difficulties, nevertheless seeks to undermine one of the longer standing institutions for international harmony.

Britain's Chancellor, George Osborne, is now reported to have gone along with this devious arrangement devised by French EU Commissioner Barnier, which will inevitably lead to other nations picking and choosing which portion of Basel III they wish to apply and further undermining the economic underpinnings of international trade and prosperity.

One must seriously question what exactly the EU now offers the world, and in Britain's case the response will inevitably reveal so little that the earliest possible withdrawal will be seen to be the only sensible, and therefore essential, next step.

Treasures from the threads - Number forty-seven

On the Basel bulls**t to an article in the Daily Telegraph. Try the blog link at the very end - Good Stuff from a former World Bank Executive Director:

perkurowski

33 minutes ago

Recommended by 2 person

In Basel III, as in Basel II, the capital requirements are still set “in relation to risk-weighted assets (RWAs)” even though it was the risk weights which proved to be most wrong. It was a low risk weight of only 20% which generated a capital requirement of only 1.6 percent (.08 x .2) allowing banks to leverage 62.5 times to 1, which drove the banks to stampede after the triple-A rated securities collateralized with lousily awarded mortgages to the subprime sector. Also if a bank lends to a small business then it needs 8 percent in capital but if it instead lends that money to the government of a sovereign rated AAA to AA then the bank needs no capital for the risk-weighted assets since the weight is 0%... lunacy! Since the risk weights have not been modified at all in Basel III, let me assure you that the Basel Committee still has no idea about what they are doing. Frightening! Basel III does mention that “These capital requirements are supplemented by a non-risk-based leverage ratio that will serve as a backstop to the risk-based measures described” but since that supplement seemingly will be small and what really counts are the marginal capital requirements for different assets Basel III does not provide a solution. The Basel Committee is still so fixated with looking at the gorilla called “perceived risk” so as to completely lose track of the ball. No financial or bank crisis has ever occurred from something ex-ante perceived as risky they have all resulted, no exceptions, from excessive lending or investment in something perceived as not risky. Basel III still constitutes an arbitrary and regressive discrimination of small businesses and entrepreneurs whose needs we in fact most want our banks to attend. With the same risk-weight discriminations, the higher the capital requirements are, the higher the real effective discrimination. Banks were authorized by the Basel Committee to lend to Greece leveraging 62.5 to 1! Now even after being sunk, we are still in the hands of exactly the same banks with exactly the same regulators following exactly the same fundamentally faulty regulatory paradigm… Help! Per Kurowski A former Executive Director at the World Bank (2002-2004) http://subprimeregulations.blogspot.com/

Basel III Tier 1 Capital rules announced.

Read the text as issued and thereafter reported by Reuters, from here. If this package works as intended the next round of the financial crisis is about to begin, particularly bad for the Eurogroup. If this does not work then it is a fudge and financial chaos will soon follow for almost all of us.