ESRB group wants treatment of sovereign debt reviewed
Report argues sovereign debt can no longer treated as risk-free
The treatment of sovereign exposures is "inconsistent" with the wider system of regulation, according to a report published by the European Systemic Risk Board (ESRB) yesterday.
The report outlines the preferential treatment afforded to sovereign exposures, suggesting this is inappropriate given the risk they pose to financial institutions.
"Elevated levels of sovereign debt imply that such debt can no longer be regarded as having zero credit risk and may also not be liquid," it argues.
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