A crucial aspect of the review will be how it treats banks' holdings of sovereign bonds. In the current regulatory framework government bonds are seen as risk-free and banks do not have to hold extra capital to back such holdings but this could change.
"No risk-weighting will be attached to (government bond) holdings at this stage, mostly due to the very basic reason that there is no appetite for a move that could trigger an unwelcome liquidation of government securities by their respective domestic banking sectors," Unicredit's Valli said.
Two sources familiar with the matter told Reuters that the ECB will also ask the banks for an 8 percent capital buffer. That would be a core tier one capital ratio of risk-weighted assets of 7 percent, as foreseen in the final stage of the Basel III regulatory framework, plus a 1 percent surcharge for banks that are important to the financial system.
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