By Ralph Benko – Andy Haldane’s speech, as analyzed by my colleague Charles Kadlec, comes down to this: “The essence of Haldane’s point is the shift from simple, easily understood broad based rules under Basel I to more complex rules is very dubious. This approach made the assessment of risk more opaque. These attempt to manage the risk of the banking system through the superior guidance of complex rules based on black box mathematical algorithms. In addition, these formulae, by their nature, ignore uncertainty by assuming the future can be captured by the past. This combination made the financial panic of 2008 more likely, and the ability of regulators to spot the risk less likely. His major insight is that simple approaches are more effective at managing complex systems than complex approaches in a world of uncertainty.” more> http://tinyurl.com/949kwet
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