Although it is a transcript from a speech, the most memorable financial read of the week is by far Mr Stefan Ingves’, the Chairman of the Basel Committee on Banking Supervision, ”Where to next? Priorities and themes for the Basel Committee”, on March 12.

In it Ingves mentions the concept of “Risk adjusted regulatory returns”.

I guess you have not heard of that but he refers, not too explicitly, to the fact that regulators allow the banks to earn a higher risk adjusted return on their equity when they lend to what is considered “safe” than when they lend to what is considered “risky”.

Until now they have never admitted, or even understood, the possibility of that creating a distortion.

http://subprimeregulations.blogspot.com/2013/03/what-is-basel-committee…