Problematic privileges of sovereign bonds
In an opinion piece for the Börsenzeitung, Bundesbank Vice-President Claudia Buch speaks out for banning regulatory privileges of sovereign bonds. Buch particularly criticises the near to complete absence of equity coverage obligations as well as the absence of large exposure limits for sovereign exposure by banks. Bert Van Roosebeke, cep Head of Division backs the Bundesbank’s call: "The existing situation increases sovereign incentives for borrowing and prevents the necessary decoupling between financial institutions and public finances. In the “Sovereign Default Regime for the Eurozone”, developed by cep in 2013, equity coverage for sovereign exposure by banks is an essential element as well.