The world is still being held hostage by its rotten banks- ▻http://www.ft.com/intl/cms/s/0/3814c880-d9c5-11e2-98fa-00144feab7de.html
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in dealing with large, complex financial institutions the rules for risk-weighting bank assets are insanely complex and distorting. In a speech last year the Bank of England’s Andrew Haldane argued that the regulators use rules that are needlessly complicated – adding that this was tantamount to asking a border collie to catch a Frisbee by applying Newton’s law of gravity to calculate its flight path. He would like more attention to be paid to a simple leverage ratio requiring a minimum level of equity capital in relation to bank liabilities. Yet Basel III’s backstop leverage figure is just 3 per cent by 2019. For a banking system to operate on the basis that a fall of a mere 3 per cent in the value of bank assets will wipe out the banks is simply absurd; all the more so when banks’ risk-management techniques were shown to be hopelessly flawed in the crisis, yet remain substantially unchanged. The dangers here were highlighted when JPMorgan, supposedly the best risk manager in the business, lost $6bn in the “London whale” trading fiasco. Its much admired bosses had no notion at all of what was afoot.
It follows that on current policy another financial crisis is probable. And since it is clear that there is no political will for further bailouts in the US, little at the German heart of the eurozone and limited fiscal capacity for bailouts in the UK, a new crisis would be much more damaging to the world economy. In effect, the UK and much of the eurozone appear determined to repeat the mistakes that inflicted stagnation on Japan for the past 23 years, but with more financial risk.
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... both the UK and the world remain hostage to unreconstructed bankers and their powerful lobbyists, to whom government ministers are extraordinarily deferential. The global economy and taxpayers everywhere are still seriously at risk.