Banking Union with a Sovereign Virus: The self-serving regulatory treatment of sovereign debt in the euro area

Daniel Gros

CEPS Papers from Centre for European Policy Studies

Abstract: In many eurozone countries, domestic banks often hold more than 20% of domestic public debt, which is an unsatisfactory situation given that banks are highly leveraged and that sovereign debt is inherently subject to default risk within the euro area. This paper by Daniel Gros finds, however, that the relative concentration of public debt on bank balance sheets is not just a result of the euro crisis, for there are strong additional incentives for banks in some countries to increase their sovereign. His contribution discusses a number of these regulatory incentives – the most important of which is specific to the euro area – and explores ways in which euro area banks can be weaned from massive investments in government bonds.

Pages: 8 pages
Date: 2013-03
New Economics Papers: this item is included in nep-ban, nep-cba and nep-eec
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Citations: View citations in EconPapers (21)

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http://www.ceps.eu/system/files/PB%20No%20289%20DG ... overeign%20Virus.pdf (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:eps:cepswp:7904

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