A Very Strange Way to Assess the Safety of Banks
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Oct. 1 (Bloomberg) -- Global regulators have a peculiar wayof assessing the soundness of big banks: Ask bankers how riskytheir investments are, then figure out if they have enoughcapital to absorb the potential losses.
This method, known as risk weighting, has failed repeatedly-- most spectacularly during the 2008 financial crisis. The goodnews is that some smart regulators understand and arearticulating the problem.