Bank of Italy defends change on capital accounting

The Bank of Italy has defended its decision on May 18 to permit Italian banks to ignore changes in the value of government bonds when calculating their capital ratios. Previously, Italian banks would have had to take account of falling market prices and add more capital accordingly, while a rise in the price would only be partially included – the same treatment accorded to equities. Under the new rule, unrealised gains and losses on European government bonds will be ignored unless the bonds

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