Bonds News

EU institutions working on sovereign bond-backed securities

BRUSSELS, Jan 27 (Reuters) - European institutions are working on a security that would be backed by euro zone government bonds, but which would not lead to the mutualisation of euro zone debt, European Commission Vice President Valdis Dombrovskis told a news conference on Friday.

“(This) is ongoing work in the European Systemic Risk Board ...(which) is already for some time working on the concept of a European safe asset, meaning the securitisation of EU member states sovereign bonds,” Dombrovskis said.

“The Commission as a member of the ESRB is of course participating in this work. We find this concept useful since it helps to address the issue of bank-sovereign loops,” he said.

He said such a European Safe Asset would provide investment opportunities for banks and other investors and ensure that banks do not hold too many bonds of just one sovereign.

“To be very clear, the concept of the work does not foresee mutualisation of those bonds,” he said, in a bid to soothe concerns in Berlin that such any instrument would make Germany liable for the debts of others. (Reporting By Jan Strupczewski and Francesco Guarascio)