Vincent points at the new Fatal Conceit
William Vincent, a veteran bank equity analyst, published a very good piece on the SNL website (gated unfortunately).
This is Vincent:
To most people in and around the banking industry, the term Basel III probably means a revised set of capital ratios, building on the two earlier, and failed, Basel structures. They are right, of course. But Basel III means a great deal more. When all of its measures are taken into account, it is clear that regulators are not just introducing another capital ratio regime. They are fundamentally altering how banks are controlled and run.
They are, in short, removing banks’ freedom, within limits, to run themselves as they and their shareholders see fit. In the pursuit of reducing the risk of another global banking crisis, they are tearing up a system that took centuries of trial and error to produce, replacing it with a set of rigid rules that will, in effect, mean that banks’ management will run their institutions on behalf of regulators, not the owners of the business.
To which he adds:
This in itself raises an interesting question: why should regulators be better placed to assess risk than the people who actually do it for a living?
Perhaps it is time we raise funds through Kickstarter to send thousands of copies of Hayek’s The Fatal Conceit to regulators?