Sovereign risk weights cannot wait

Why reform of Basel rules is urgent – and how to improve on December 2017 proposals

The aftermath of the global financial crisis has seen a significant and sustained overhaul of the regulatory architecture facing banks and other financial market participants. One particular cause of concern was the so-called bank-sovereign doom loop. Failing banks can trigger taxpayer-funded bailouts, and declining sovereign creditworthiness can stress banks’ balance sheets because of their large holdings of government debt, with both developments potentially reinforcing each other.

And yet