However, banks do not have such privileged information on the debt of a nation – especially on the debt of central governments. It makes sense for banks to hold a certain amount of sovereign debt for liquidity purposes. But there is no reason why the financing of governments should not be more of a matter for the capital markets.
1  Crosignani, M et al., The Portuguese Banking System during the Sovereign Debt Crisis, July 2015. BIS central bankers’ speeches  5  Doing away with the regulatory privileges afforded to sovereign debt would force the markets to take account of the differences in sovereigns’ risk profiles.