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Global regulators allow zero risk weighting for euro zone rescue debt
March 18, 2014 / 10:52 AM / 4 years ago

Global regulators allow zero risk weighting for euro zone rescue debt

LONDON, March 18 (Reuters) - 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.

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