FRANKFURT, Nov 25 (Reuters) - European Central Bank President Mario Draghi did not block proposals that could force banks to start holding capital against the risk of default for some government debt, the ECB said on Monday.
Der Spiegel magazine reported in a story released on Sunday that Draghi, in his capacity as head of the European Systemic Risk Board (ESRB), had handed back proposals from ESRB officials on changing the way sovereign debt is treated.
Mainstream government debt is weighted at zero risk, meaning banks do not have to hold any capital against sovereign paper in their books. The zero-risk weight is also part of the Basel III banking regulations, which are being gradually phased in.
The euro zone’s sovereign debt crisis has highlighted the dangers of banks buying government bonds as a theoretically safe buffer against risky investments, particularly since holders of Greek bonds took a hit in the country’s bailout.
“The president of the ECB in his capacity as chair of the European Systemic Risk Board (ESRB) did not block proposals to change the risk weighting of government bonds held by financial institutions,” an ECB spokeswoman said in a written statement.
“The General Board of the ESRB decided in September to review the report of its advisers and to publish it after this review,” she added.
The ESRB, an ECB-linked body, is designed to take a bird’s eye view of Europe’s economy and to flag up any emerging problems for relevant authorities to act on. (Writing by Paul Carrel; editing by Patrick Graham)