Eurozone needs low-risk asset, ECB paper says


European policy-makers should create a low-risk asset in order to encourage banks to reallocate their holdings of sovereign bonds, a working paper published by the European Central Bank argues.

In Regulating the doom loop, Spyros Alogoskoufis and Sam Langfield model how banks re-allocate their sovereign bond portfolios in response to regulatory reforms. The question is one of the most heavily debated by European policy-makers.

Some national governments, led by Germany, have consistently called

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