ECB President Mario Draghi has kicked back a proposal from advisors to change the way sovereign debt is risk-weighted and asked them to do some more work on it, German weekly news magazine Spiegel reported.
The euro zone’s sovereign debt crisis has highlighted the dangers of banks buying government bonds as a theoretically safe buffer against risky investments, particularly since holders of Greek bonds took a hit in the country’s bailout.
The European Central Bank is due to run a series of checks on banks’ balance sheets before taking up its role as the euro zone’s banking supervisor in November 2014, and Spiegel quoted central bank sources as saying they were worried that having a debate about the current system of financing governments would be untimely.
The measures suggested by the advisors could have a big impact on how crisis-stricken states finance themselves in the future, the magazine said on Sunday.
The ECB declined to comment on the report when contacted by Reuters.
Members of the European Systemic Risk Board, an ECB-linked body that monitors potential economic problems, made a series of suggestions such as bundling together the risks from European banks’ large investments in their national government’s bonds, the magazine said.
via Reuters
Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.