Reforming the prudential treatment of banks' sovereign exposures’, Bank of Italy Occasional Paper, 326, https://www.bancaditalia.it/pubblicazioni/qef/2016-0326/QEF_326_16.pdf). On the same subject, see also: https://voxeu.org/article/recent-developments-regulatory-treatment-sovereign-exposures. 16  The reason for considering this total rather than the net value is that the available data do not tell us if and to what extent the risk embedded in assets is effectively hedged by liabilities.
See Roca, R. and F. Potente (2017), ‘Risks and challenges of complex financial instruments: an analysis of SSM banks’, Bank of Italy Occasional Paper, 417 https://www.bancaditalia.it/pubblicazioni/qef/20170417/index.html?com.dotmarketing.htmlpage.language=1. 8  Level 2 and Level 3 instruments play an important role in the functioning of the financial system. However, the available information is limited, in spite of their huge volumes.