Peter Goves, Michael Spies, Alessandro Tentori, 02 March 2016

Sovereign risk and its treatment by European banks is a frequently debated topic. In particular, regulators are focusing on zero risk weighting and large exposure limits. This column argues that redesigning the macroprudential framework for sovereign risk management will be a key theme in the years to come. Depending on the exact outcome, the structure of the EZ bond market might look very different from its current shape. This could have far-reaching consequences for both the ECB’s monetary policy strategy and investors alike.

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