Regulatory capital rules redefine banks as investor vehicles rather than funding distributors

Evidence

The bank is understood more as a firm in which people invest than a firm whose purpose is to distribute funding and enable households and businesses to invest. The calculation method of the credit rate is indeed designed to minimise the level of required capital for the bank to cover its risks, and thus maximise shareholder returns. More broadly, the preoccupation with having banks that are able to attract private capital and offer good returns was constantly repeated when the accords were in negotiation. Of course, this conception of the bank also tends to deny the specificities of other types of banks, mutual societies or public credit establishments, and is imposing a single relational model in respect of the providers of capital. Here again, financialisation of valuation methods has transformed financial management and financial indicators themselves, and given priority to the interests of investors on the financial markets, in this case the shareholders of banking companies. — Ève Chiapello, Financialisation of Valuation, 64

Categorization

• XREF: Shows how Basel-style capital adequacy metrics enforce a unitary model of the bank, crowding out mutual and public credit institutions. — connects to: A financial model can be written into regulation to enact its own assumptions — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 742; The Federal Reserve acted subservient to banks while posing as a regulator — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 2082; Expert consensus reports codify what banks can get away with rather than genuine reform — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 539 (+2 more)

Related

• Credit-risk regulation imports market-finance models developed for traded securities. (similarity 0.81)
• Higher capital requirements bind nothing when capital quality is unregulated (similarity 0.81)

Broader Connections

• A financial model can be written into regulation to enact its own assumptions #expands (0.80) — Donald MacKenzie, An Engine, Not a Camera, 742