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27 Mar 2015
"In the euro area we are already in the danger zone” – ECB’s Weidmann
FXStreet (Mumbai) - Speaking to a Bundesbank conference in Frankfurt on Friday, European Central Bank (ECB) Governing Council member and Germany's central bank President Jens Weidmann said that debt in the euro zone has reached the "danger zone", suggesting a cap for banks' exposure to the debt of individual countries.
Key Quotes:
“But actually, this timeless quip does not apply to debt. Interest expenses are tax-deductible, while equity disbursements are not,”
"In the euro area we are already in the danger zone - at least with regard to public debt standing at 91% and corporate debt at 105%,"
“Even though the authors (of the study) caution that the effect is likely to be lower for the biggest banks, these numbers are sizable by any measure, especially considering that the proposed Basel III leverage ratio is 3%,”
A recent IMF study suggesting that ending preferential tax treatment of debt would increase average unweighted bank equity by 2.2 to 4.2 percentage points.
“Doing away with the preferential tax treatment of debt could therefore provide a major boon for financial stability,”
"Sovereign debt needs to be backed by capital, and exposure to a single sovereign must be capped, just as is the case for any private debtor."
Key Quotes:
“But actually, this timeless quip does not apply to debt. Interest expenses are tax-deductible, while equity disbursements are not,”
"In the euro area we are already in the danger zone - at least with regard to public debt standing at 91% and corporate debt at 105%,"
“Even though the authors (of the study) caution that the effect is likely to be lower for the biggest banks, these numbers are sizable by any measure, especially considering that the proposed Basel III leverage ratio is 3%,”
A recent IMF study suggesting that ending preferential tax treatment of debt would increase average unweighted bank equity by 2.2 to 4.2 percentage points.
“Doing away with the preferential tax treatment of debt could therefore provide a major boon for financial stability,”
"Sovereign debt needs to be backed by capital, and exposure to a single sovereign must be capped, just as is the case for any private debtor."