Financial Repression Tracker

Rules that steer savings into government debt or hold returns below inflation, country by country.

Steer · Prudential sovereign bias

Large-exposure and concentration-limit exemptions for sovereigns

What it is
Limits on how much a bank may lend to or invest in a single counterparty or issuer exclude the government, so a bank can hold unlimited amounts of its sovereign's debt.
Why it counts
Removes the diversification ceiling that would otherwise cap banks' holdings of government paper, enabling the sovereign-bank 'doom loop'.

When it was in force

  • International: 2019 → now, in force
  • European Union: 2014 → now, in force

2 examples

  1. International

    2019 → nowIn force

    The Basel large-exposure limit of 25% of Tier 1 capital does not apply to sovereigns and their central banks.

    Basel Committee, Supervisory framework for measuring and controlling large exposures (April 2014), paras 13 and 61Primary source
    “As set out in paragraph 13, banks' exposures to sovereigns and their central banks are exempted.”

    bis.org (opens in a new tab)Checked: quote matched on the page by script

  2. European Union

    2014 → nowIn force

    Claims on central governments that would get a 0% risk weight are exempt from the EU large-exposure limit.

    Regulation (EU) No 575/2013, Article 400(1)(a)Primary source
    “The following exposures shall be exempted from the application of Article 395(1): (a) asset items constituting claims on central governments, central banks or public sector entities”

    eur-lex.europa.eu (opens in a new tab)Checked: quote confirmed on the page by a reviewing agent

    European Union today: index 44.0

Examples and their dates reviewed .

Further reading