“The ECB president in his capacity as chairman of the European Systemic Risk Board (ESRB) has not blocked proposals to change the risk weight associated with sovereign bonds held by financial institutions. The General Board of the ESRB had decided in September to review the report of its directors and to publish it at the end of this review”.
A Eurotower spokesman explained this to Radiocor in relation to an article published over the weekend in Der Spiegel according to which Mario Draghi had sent back to sender the proposals to change the way government bonds are treated and to force the banks to set aside capital to protect against a possible loss in value of these instruments. Draghi, the spokesman specified, did not block or reject the proposal but "simply sent the text back to the authors and asked for clarifications", as happens in many situations in which points need to be clarified or there is a normal dialectic between the set off. The ECB, Frankfurt specifies, in the first two phases of this process, i.e. the risk assessment and the asset quality review, is however not a 'regulator' but has surveillance tasks and this "means that it can only comply current practices, which set the risk value of sovereign bonds at zero”.
“Government bonds – added the spokesman in an email – are included in the scope of this exercise. The methodology for valuing these exposures will follow current accounting rules on appreciations and writedowns. Depending on which asset class the bond belongs to, the appropriate procedures will apply. Concerning the third part of the overall assessment, the ECB will provide further information on the stress tests towards the end of January.
