Contribution on regulatory treatment of sovereign exposures of banks

Mitigating the sovereign-bank nexus is a key policy target of banking sector regulatory reform in the euro area. An important, highly debated line of policy proposals aims at removing privileges for sovereign exposures in banking regulation. Based on a proposal of the German Council of Economic Experts for risk-adjusted large exposure limits and risk-adequate capital requirements in its Annual Report 2015/16, this contribution features updated calculations on the impact of the proposal and discusses alternative reform options.

The contribution “Removing Privileges for Banks’ Sovereign Exposures – A Proposal” by Jochen Andritzky, Niklas Gadatsch, Tobias Körner, Alexander Schäfer and Isabel Schnabel in the issue “Sovereign and Banking Risks – What Policies?” of “Sovereign and Banking Risks – What Policies?” can be found here.