ECB’s Draghi Rejects Bail In Proposal

ECB President Mario Draghi has kicked back a proposal from advisors to change the way sovereign debt is risk-weighted and asked them to do some more work on it, German weekly news magazine Spiegel reported.

The euro zone’s sovereign debt crisis has highlighted the dangers of banks buying government bonds as a theoretically safe buffer against risky investments, particularly since holders of Greek bonds took a hit in the country’s bailout.

The European Central Bank is due to run a series of checks on banks’ balance sheets before taking up its role as the euro zone’s banking supervisor in November 2014, and Spiegel quoted central bank sources as saying they were worried that having a debate about the current system of financing governments would be untimely.

The measures suggested by the advisors could have a big impact on how crisis-stricken states finance themselves in the future, the magazine said on Sunday.

The ECB declined to comment on the report when contacted by Reuters.

Members of the European Systemic Risk Board, an ECB-linked body that monitors potential economic problems, made a series of suggestions such as bundling together the risks from European banks’ large investments in their national government’s bonds, the magazine said.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza