We must stop petit bank regulatory bureaucrats from distorting the markets with their risk-weights

Sir, George Magnus opines that “Draghi’s bond-buying plan is economically unsound” September 18. I fully agree with him but for a reason he does not mention, or is perhaps not even aware of. 

Most of those funds that ECB’s “outright monetary transaction” generate more sooner than later, will flow through a banking system that has become regressive, as a consequence of bank capital requirements based on risk. 

If regulators are not willing to allow the funds to flow where these could be most productive, but insist on these flowing to where they ex-ante believe these to be safer, they completely ignore the role of the market… and that is as economically unsound as it comes. 

We must urgently allow the market decide without some petit bank regulatory bureaucrats distorting its functioning by assigning, quite haphazardly, the risk-weights which decide how much capital each bank needs, and, with that, who in this bank capital scarce world, gets the loans.