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Sovereign bond-backed securities: Risk diversification and reduction [EU Legislation in Progress]

Written by Angelos Delivorias (1st edition),

© nito / Fotolia

As a part of the European regulatory responses to the financial and sovereign debt crises, the European Commission has proposed a regulation on sovereign bond-backed securities (SBBS), a new class of low-risk securities backed by a diversified pool of national government bonds. The proposal seeks to provide an enabling framework for a market-led development of SBBS, thus encouraging banks and investors to diversify their holdings of euro area bonds. The proposal is meant to address a weakness that appeared during the aforementioned crises, when banks’ high exposure to their sovereigns’ own debt, coupled with deteriorating creditworthiness of those sovereigns, led to balance sheet strains for banks. This in turn put pressure on government budgets, thus creating mutual contagion and financial instability. The procedure is currently at the initial stage in the European Parliament and the Council.

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Proposal for a Regulation of the European Parliament and of the Council on sovereign bond-backed securities
Committee responsible: Economic and Monetary Affairs (ECON) COM(2018) 339
24.5.2018
Rapporteur: Jakob von Weizsäcker (S&D, Germany) 2018/0171 (COD)
Shadow rapporteurs:

 

 

Fulvio Martusciello (EPP, Italy)
Bernd Lucke (ECR, Germany)
Enrique Calvet Chambon (ALDE, Spain)
Martin Schirdewan (GUE/NGL, Germany)
Ernest Urtasun (Greens/EFA, Spain)
Marco Zanni (ENF, Italy)
Ordinary legislative procedure (COD) (Parliament and Council on equal footing – formerly ‘co-decision’)
Next steps expected: Publication of draft report

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