These proposals, moreover, overlook the stabilising role that banks, by acting as contrarian investors, can play on bond markets in periods of tension. For these reasons, after almost three years of work and intensive discussions, at end-2017 the Basel Committee decided to maintain the current regulation.
The reduction in sovereign risk must ultimately come from sound government policy, as it cannot be obtained by simply shifting sovereign bonds from the balance sheet of one economic sector to that of another. This requires not only balanced and prudent fiscal policies but, most importantly, structural reforms aimed at regaining sustained GDP growth.