Sherlock Holmes of the Year

28 September, 2012 at 14:34 | Posted in Economics, Varia | Leave a comment

Hervé Hannoun – Deputy General Manager of the Bank for International Settlements (BIS) – in a speech on sovereign risk in bank regulation and supervision, on 26 October 2011, said:

My topic today is the treatment of sovereign risk in banking regulation and supervision. This theme has been spotlighted by the sovereign debt strains affecting most advanced economies. My conclusion is that market participants’ complacent pricing and accumulation of sovereign risk in the decade up to 2009 was a market led phenomenon that cannot be attributed to the Basel standards. However it becomes crucial for regulators and supervisors of large banks to clarify that although sovereign assets are still a relatively low risk asset class, they should no longer be assigned a zero risk weight and must be subject to a regulatory capital charge differentiated according to their respective credit quality.

Impressive indeed – who would have thought anything like that with countries like Greece, Spain and Italy hanging on the ropes …


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