
The hidden risks in dormant Basel III bond rule
Growing sovereign bond portfolios face new risks and mixed messages

A lot of surprises can lurk beneath the placid surface of an economy at rock-bottom rates. One could spring from a currently dormant rule that, for the first time, exposes banks' core capital to changes in the value of their huge liquidity reserves of government bonds.
In some of Europe's periphery countries, sovereign bond holdings have grown significantly in recent years; crisis-scale swings in their value would now expose some local banks to losses of more than €1 billion, wiping out 15% or
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