econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 14 March 2016

Has The Basel Committee Forgotten The Purpose Of Banks?

Written by , A View from the Radical Middle

John Lounsbury, writing on a lead from Joe Bongiovanni, has made us aware of a working paper by Hyman P Minsky, from October 1994, titled "Financial Instability and the Decline (?) of Banking: Public policy considerations". Hyman P Minsky stated the purpose of banks, but all Basel Committee regulators seem to care about is avoiding credit risk.

risk.people.380x188

Lounsbury writes:

"Minsky was concerned in the early 1990s that what he thought were the two roles of banking in a capitalist society were being performed to a decreasing extent by organizations that were chartered as banks."

The two primary functions of banking he describes as (1) supplying the means of payments; and (2) channeling resources into the capital development of the economy.

Minsky argued that this separation of banking from the real economy would diminish the role of central banks in influencing the economy in the traditional manner through monetary policy. Given this loss of influence through the traditional tools of "changing the availability or cost of financing". He felt that the variable remaining would be management of "uncertainty".

He argued that the changes in banking required regulation to be rethought.

And I ask, for the umpteenth time. What has the pillar of current bank regulations, the risk weighted capital requirements, to do with banks fulfilling efficiently those two primary functions?

The answer: Absolutely nothing. But it is even worse than that, since the risk weighing totally distorts the allocation of bank credit to the real economy.

The current bunch of regulators holed up in that small mutual admiration club known as the Basel Committee for Banking Supervision, regulated our banks without even asking themselves what the purpose of our banks is.

They must be held accountable for that, and publicly paraded down our avenues wearing dunce caps.

It seems like it all started during a dinner in London on September 2, 1986.

A version of this article appeared at My Voice and Noise on Subprime Bank Regulations 13 March 2016.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical Opinion Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.



You can also comment using Facebook directly using he comment block below.





Econintersect Opinion


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
The Expected Effects of Petitions to Improve the Monetary System
Energy and Falling Productivity
News Blog
Early Headlines: Asia Stocks Down, Fed Wants Banks' Commodity Limits, Treasuries Being Sold, EZ Business Output Softens, France Contraction, Saudi's Boost Banks, Canada Tightens Borders For Chinese And More
Most Read Articles Last Week Ending 24 September
How Britain Owes Its Immigrants A Debt Of Gratitude
Super Mario, The Timeless Bestseller
Explainer: The Nine Swing States That Will Decide The Next US President
How Long Does Apple Support Older IPhone Models
What We Read Today 25 September 2016
Dangerous Ultra Pure Water
Job Employment Tenure Down
Mobile Payments Promise To Improve Financial Accessibility In Mexico
Aging Populations May Mean Lower Economic Growth
Urban Rebound Causes Large Shift In Lower Credit Borrowers To Seek The Outer Suburbs
Infographic Of The Day: How Oil Is Formed
Investing Blog
Monday Morning Call 26 September
We're Back Here We Started
Opinion Blog
Heading For A Fall? With Summer Over, Europe Must Face Up To Its Mounting Crises
What If We're In A Depression But Don't Know It?
Precious Metals Blog
War On Cash Turns To $20, $50, And $100 Bills
Live Markets
23Sep2016 Market Close: US Indexes Close Lower As Crude Prices Slip, Fed Lowers Economic Growth Prospects, Indicators Melting Into Bearish Territory
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government



Crowdfunding ....






























 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved