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The banks take this risk not just because they expect that there will be a bailout but also because the Basel Accords allow them to treat sovereign bonds as ris
by bd_at_rivenhill 15y ago
The banks take this risk not just because they expect that there will be a bailout but also because the Basel Accords allow them to treat sovereign bonds as riskless when calculating their Capital Adequacy Ratio, making those bonds look like a better deal relative to other bonds of equal risk.