Swathes of assets just vanishing into thin air

Imagine if I told you I could reduce my own body weight by 80%, on paper, through a series of calculations utilising my own proprietary mathematical models, so complex and prized that I could not divulge them.

You would be right not to believe me, and might think I’m nuts. Yet this, in essence, is what regulators let banks do all the time with their balance sheets.

Huge swaths of assets are allowed to vanish, making too-big-to-fail financial firms seem leaner and safer than they are. Under the system known as risk weighting, banks get away with this because they are allowed to stipulate that some assets carry little, if any, risk.