Draghi-backed report urges review of sovereign debt treatment
FRANKFURT (Reuters) - Regulation may have led banks to invest too much in sovereign bonds, and there needs to be a global review of the regulatory framework for holding such debt, Europe's early warning financial risk body said in a report.
The report by the European Systemic Risk Board (ESRB), which was backed by ECB President Mario Draghi, recognised the difficulty in reforming the existing framework without rocking sovereign debt markets.
However, the ESRB, a body designed to give early warnings set up as one of Europe's responses to the financial crisis, warned that existing regulations "may have led to excessive investment by financial institutions in government debt."
"The current regulatory framework of sovereign exposures held by financial institutions needs to be re-examined at a global level," Draghi said in a foreword to the report.
"I trust that the report will help to foster a discussion which, in my view, is long overdue," he added.
To read the report in full, click:
https://www.esrb.europa.eu/pub/pdf/other/esrbreportregulatorytreatmentsovereignexposures032015.en.pdf?3f8c4ccc9d182610331e955664870998
(Writing by Paul Carrel; Editing by Hugh Lawson)
