Posted by WARREN MOSLER on September 13th, 2010
Bank capital rules are irrelevant for world growth.
Bank capital arises endogenously from the economy to meet regulatory needs.
Banks price loans to realize risk adjusted rates of return needed to raise any needed capital.
Banks lending suffers only if non bank sources offer loans at better terms.
Therefore all this banking news is mainly relevant to underwriters of new capital who will profit enormously.
And we all know who those infinitely clever ones are as they again fool enough of the people enough of the time to stay highly profitable.
And everyone seems to have missed the fact that each nation is best served by making its own capital rules.
When it comes to bank capital rules, nothing is gained by international cooperation (apart from generating international underwriting fees for the world’s underwriters).
Ironically, this lone area of actual, effective international cooperation is also the one area where all are best served by going it alone (apart from generating international underwriting fees for the world’s underwriters).
Who would have thought…
ECB’s Ordonez Says Transition Period for Basel Rules Sufficient
Sept. 13 (Bloomberg) — European Central Bank Governing Council member Miguel Angel Fernandez Ordonez said banks will have a sufficient period of time to comply with the new Basel rules on banking regulation.
“We have a transition period that’s enough for everybody,” Ordonez told reporters in Basel, Switzerland, today. “I’m very, very happy with the result.”
The new accord “finishes uncertainty” because banks are now aware of capital requirements, buffers and the timeframe to phase-in the new rules, he said. The decision on the new regulation was taken unanimously, he added.
Zapatero Says Decision on New Basel Rules Is ‘Good’ Move
Sept. 13 (Bloomberg) — Prime Minister Jose Luis Rodriguez Zapatero said the decision on new banking rules is a “good” move. He spoke at a news conference in Oslo today.
Lagarde Calls Basel Accord’s 7% Capital Rule an ‘Achievement’
Sept. 13 (Bloomberg) — French Finance Minister Christine Lagarde comments on yesterday’s international agreement to raise capital requirements on banks. She spoke to reporters today in Oslo.
The Basel Committee on Banking Supervision will require lenders to have common equity equal to at least 7 percent of assets, weighted according to their risk, including a 2.5 percent buffer to withstand future stress.
“It’s a significant progress.
“Our purpose was to improve the quality and the quantity of capital held by banks in order to avoid the recurrence of risk.
“Moving to 7 percent is clearly an achievement.”