ECB may ask lenders to hold capital against sovereign bonds -FT
Dec 11 (Reuters) - The European Central Bank could make eurozone banks hold capital against sovereign bonds, in a bid to stop weak lenders from using its cash to buy up debt from crisis-hit countries, the Financial Times said, citing ECB executive board member Peter Praet.
Praet said ECB could combine its new powers as chief banking regulator with its existing role as currency issuer to toughen up the requirements on sovereign bonds that have been traditionally treated as risk-free, the FT said on its website. (link.reuters.com/red45v)
A "doom loop" has marked the euro zone debt crisis, where cash-strapped sovereigns have bailed out weak banks, which were in turn chock full of that government's bonds as they fell in value.
The FT said the ECB would try to makes these changes using next year's health check of the eurozone's 130 biggest lenders alongside any new offer of cheap long-term liquidity.
Praet said if sovereign bonds were treated "according to the risk that they pose to banks' capital" during the health check, then lenders would be less likely to use central bank liquidity to buy yet more government debt, the paper added.
- Ten countries scour sea for Malaysia jet lost in 'unprecedented mystery' |
- Confrontation in Ukraine as diplomacy stalls |
- Missing Malaysian jet may have disintegrated in mid-air: source |
- Mexico kills drug kingpin reported dead years ago: official
- Pistorius vomits in court at Steenkamp autopsy details |