Euro zone banks have significant holdings of domestic sovereign debt, inducing a close sovereign-bank nexus that endangers financial stability. We present a suggestion of how to break this nexus, which does not involve pooling and/or tranching and is fully consistent with standard Basel capital requirements. At the same time, it does not require capital provision for sovereign portfolios held as collateral for liquidity operations with the lender of last resort (LOLR). Rather, it differentiates between the purpose of collateral for LOLR liquidity operations and the individual investment decision of which sovereign debt to hold. In this way, our methodology is market-driven and can foster financial integration in Europe.

Redner

LLL:Image Jörg Rocholl

Prof. Jörg Rocholl, Ph.D.

ESMT European School of Management and Technology, Berlin

Standort

Termin

19.10.2017 | 11:30 - 13:00

Veranstaltungsort

Zentrum für Europäische Wirtschaftsforschung GmbH (ZEW)

L 7, 1 68161 Mannheim

Raum

1 und 2

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