Tolerance towards situations of persistent support to borrowers with a precarious financial condition and no prospect of growth would not only risk undermining the soundness of the banks but also hinder the efficient allocation of resources to the economy. The inspections we perform make it possible to assess the situation of each intermediary on a case-by-case basis.
Furthermore, unlike other asset classes, there is no limit to the volume of sovereign bonds a bank can hold from its home country. This has forged a close link between the solvency of countries and the solvency of their domestic banking sectors. And this link is even closer today than it was before the financial crisis in 2008.