January 31, 2018 / 4:13 PM / 6 months ago

Italy's Padoan warns against risk-weighting banks' sovereign bond holdings

MILAN (Reuters) - Italian Economy Minister Pier Carlo Padoan said on Wednesday he was concerned about proposals to differentiate the levels of risk attached to government bonds of different countries that banks hold in their portfolios.

Italy's Finance Minister Pier Carlo Padoan attends a conference on the EU's next long-term budget after Brexit in Brussels, Belgium, January 8, 2018. REUTERS/Francois Lenoir

Interviewed at a conference organized by Reuters Breakingviews, Padoan said the idea which has circulated for some time among some European Union officials, could lead banks to sell off government bonds considered more risky.

“To be honest I am very worried about the proposal to risk-weight sovereign bonds, which would induce banks to reduce their portfolios,” he said.

Padoan also said increasing Italy’s nominal economic growth was crucial to bringing down its public debt - the highest in the euro zone after Greece’s.

He added that this depended on the European Central Bank raising inflation to “a more decent level”.

Reporting by writing by Gavin Jones Gavin Jones

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