LONDON, March 18 Global banking regulators have
agreed that banks holding bonds issued by two European Union
funds to help struggling euro zone countries don't have to set
aside capital to cover them.
The Basel Committee, drawn from central banks and regulators
from nearly 30 countries, said in a statement on Tuesday that
supervisors may allow banks to apply a so-called zero risk
weighting to claims on the European Stability Mechanism (ESM)
and the European Financial Stability Facility (EFSF).
Such debt will also be eligible as top tier assets in the
new liquidity buffers banks from across the world must build to
withstand short term market shocks.
The committee was under pressure from European countries to
assign a zero risk weighting or fuel a debate on whether all
sovereign debt should continue to be zero risk weighted.
Separately on Tuesday, the German Constitutional Court
confirmed the legality of the ESM.