IDEAS home Printed from https://ideas.repec.org/a/bfr/fisrev/20111609.html
   My bibliography  Save this article

Is sovereign risk properly addressedby financial regulation?

Author

Listed:
  • Nouy, D.

Abstract

The treatment of sovereign risk in banking and insurance regulations has been highlighted by the sovereign debt strains affecting most advanced economies. In particular, it has become key to assess whether these regulations require from financial institutions to hold adequate regulatory capital associated with sovereign exposures. More broadly, although the main issue raised by the sovereign debt crisis is related to fiscal policies and consolidation, one crucial question is to determine how and to what extent financial regulation can help to mitigate and prevent vulnerabilities of the financial sector to sovereign risk. From this perspective, it appears that current regulatory framework does not require from financial institutions to hold significant regulatory capital against sovereign risk, inadequately assuming sovereign debt as a low-risk and even a risk-free asset class. Furthermore, some regulatory initiatives, while globally enhancing standards, could create further incentives to encourage financial institutions to hold sovereign debt. In addition to considering better reflection of sovereign risk in fi nancial regulation, supervisory practices also appear as a crucial tool to address the issue of heightened sovereign risk and its potential impact on financial stability.

Suggested Citation

  • Nouy, D., 2012. "Is sovereign risk properly addressedby financial regulation?," Financial Stability Review, Banque de France, issue 16, pages 95-106, April.
  • Handle: RePEc:bfr:fisrev:2011:16:09
    as

    Download full text from publisher

    File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/financial-stability-review-16_2012-04.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Michael Davies & Tim Ng, 2011. "The rise of sovereign credit risk: implications for financial stability," BIS Quarterly Review, Bank for International Settlements, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. René Doff, 2016. "The Final Solvency II Framework: Will It Be Effective?," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 41(4), pages 587-607, October.
    2. Alogoskoufis, Spyros & Langfield, Sam, 2018. "Regulating the doom loop," ESRB Working Paper Series 74, European Systemic Risk Board.
    3. van Riet, Ad, 2016. "Government Funding Privileges in European Financial Law : Making Public Debt Everybody's Favourite?," Discussion Paper 2016-045, Tilburg University, Center for Economic Research.
    4. Lang, Michael & Schröder, Michael, 2014. "What drives the demand of monetary financial institutions for domestic government bonds? Empirical evidence on the impact of Basel II and Basel III," ZEW Discussion Papers 14-123, ZEW - Leibniz Centre for European Economic Research.
    5. Donadelli, Michael & Jüppner, Marcus & Prosperi, Lorenzo, 2019. "Risk weighting, private lending and macroeconomic dynamics," Discussion Papers 30/2019, Deutsche Bundesbank.
    6. repec:eee:finsta:v:33:y:2017:i:c:p:311-330 is not listed on IDEAS
    7. Arnould, Guillaume & Dehmej, Salim, 2016. "Is the European banking system robust? An evaluation through the lens of the ECB׳s Comprehensive Assessment," International Economics, Elsevier, vol. 147(C), pages 126-144.
    8. Sergio de Ferra, 2017. "External Imbalances, Gross Capital Flows and Sovereign Debt Crises," 2017 Meeting Papers 726, Society for Economic Dynamics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bfr:fisrev:2011:16:09. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael brassart). General contact details of provider: http://edirc.repec.org/data/bdfgvfr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.