Capital hit from death of 0% sovereign weight 'not enormous'
Banks would have to raise equity equal to 0.7% of current levels, ESRB finds – that is "not enormous", one banker says, but may lead to other complications
European banks will not face a big capital hit if they are forced to recognise default risk on more of their sovereign bond holdings, even if holdings increase as a result of new liquidity ratios. Those are the conclusions of new research from the European Systemic Risk Board (ESRB), which argues prudential regulation needs to do a better job of capturing sovereign exposure and outlines six different policy options.
A rough assessment of the impact one of those options would have – ending the
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