Proposed rules for sovereign debt risk weightings
will cost eurozone banks up to €135 billion ($152.6
billion) extra in regulatory capital, or see them dispose of
high levels of government assets, according to a new
Banks will be required to either raise extra
capital to maintain solvency levels or reallocate €492
billion of sovereign holdings - which could be just as damaging
- to comply with the proposed new regulation, claims the
June 8 report from Fitch Ratings.
"I think it’s more likely that banks will
dispose of the assets than hold extra capital," said John
Ahern, partner at Jones Day. "The cost of capital, as we all
know, is incredibly high right now. But mass unloading could be
damaging to yields, too."...