Access to bank credit is hard and expensive enough for those small businesses, entrepreneurs with no access to good credit ratings to additionally be subjected to what could be considered as bullying by the Basel Committee on Banking Supervision… or just plain odious discrimination.
Though lending to this “risky” group has never ever originated any bank or financial crisis, since those only happen because of excessive investments or lending to what is perceived as not risky, the strong regulator bullies decided to impose on the banks 5 TIMES more capital requirements when lending to the weak and “risky” (100% regulatory-risk-weight) than when lending to the triple-A rated (20% regulatory-risk-weight).
And this even though this group of clients, by being charged higher interest rates on account of their market-risk-weights, already contribute much more to the capital of banks than any triple-A rated client.
And this even though this group of clients, by being charged higher interest rates on account of their market-risk-weights, already contribute much more to the capital of banks than any triple-A rated client.
And this even though this group of clients, with little alternative access to financing, is supposed to stand first in line as bank clients; and this even when this group is first in line to supply the world with the economic growth and the jobs it always needs.
In many places bullying is a punishable act that can lead to jail sentences. Though the Basel Committee might deserve it, especially since by bullying the weak it pushed the banks over the triple-A cliff, it would be hard to jail it. As the “risky” has so much less lobbying power than the “not-risky” could the IMF and World Bank at least help to stop the Basel Committee from bullying the “risky”? Please!
Not-rated or rated risky of the world, unite!
Below are three occasions where I recently pleaded IMF and the World Bank for the above. Will I also need to get down on my knees?
The Civil Society Town-Hall Meeting
In the video you can find my question in minute 47.28, Dominique Strauss-Kahn’s answer in minute 1.01.08, and Robert Zoellick’s answer in minute 1.16.32
Structural Reforms: Effective Strategies for Growth and Jobs
Here my first and second question can be seen from minute 1.14.25 on.
Accelerating Financial Inclusion–Delivering Innovative Solutions
My question (not the best sound quality, but it is a similar question) can be found in minute 1.04.03 on
Per Kurowski
A former Executive Director at the World Bank (2002-2004)
