April 8, 2016 / 5:55 PM / 2 years ago

Banks' sovereign holdings should be capped: EU official

CERNOBBIO, Italy (Reuters) - Euro zone banks should not be allowed to own too much of their own countries’ debt, though such a limit would need to be introduced very gradually, EU Commission Vice President Jyrki Katainen said on Friday, acknowledging it would pose a problem to countries like Italy.

“It’s not good that banks have too big exposure to their own country’s paper,” he told reporters on the sidelines of a business conference.

He said it would help set the right price for sovereign bonds if governments were forced to find other buyers once banks had limits to how much public debt they could hold.

“Of course there must be a transition period. Because for instance here in Italy or in other countries you cannot change things overnight, not even in five years. It will take some time.”

Reporting by Valentina Za; Editing by Mark Bendeich

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