The 3rd Annual RiskMinds USA Conference starts today. I will be attending this conference on behalf of the GlobalRisk community and will report back with key observations and discussions following the conference or before -the days and evenings are jam-packed at this event!
I am opening this forum to ask for the questions you wish to be asked at the sessions. I will do my best to pose these questions and report the responses back to our community. The agenda is rich, broad and includes:
- Systemic risk regulation
- Macroproduential supervision and regulation
- Basel III liquidity standards
- Fundamental trading book review
- Central counterparty risk
- and more.
Replies
Banks clear for perceived risks of default of borrowers by means of interest rates, amount lend and other contractual terms.
And so when the regulators also use the same perceived risks to set capital requirements for banks they introduce a distortion that cause the banks to overdose on perceived risks.
As a result we now have a crisis defined by obese bank exposures to what was ex ante officially deemed as absolutely not risky and anorexic bank exposures to what is officially deemed as risky, like small businesses and entrepreneurs.
Even the current low Treasury rates are not real market rates as they include the subsidies to the government implicit in bank regulations which impose much less capital requirements on the banks when lending to the government that when lending to other. And so we are flying blind!
Why is this highly distortive and dangerous discrimination, in favor of what is officially perceived as not risky, not even an issue in the current discussions?