(Updates with details)
MILAN, Jan 29 (Reuters) - Stripping government bonds of their risk-free status when they exceed certain thresholds on banks’ balance sheets should not be “a taboo” as the Greek crisis showed such debt carries risks, a senior Italian banker said on Wednesday.
Italian authorities have always opposed the introduction of rules forcing lenders to risk-weight sovereign bonds. In December, however, Italian Economy Minister Roberto Gualtieri said incentives to diversify such holdings could be discussed.
Mediobanca Chief Executive Alberto Nagel said during a Breakingviews event in Milan that thresholds could be considered when government bonds held by a bank largely exceed capital.
Italy’s banks are large holders of Rome’s sovereign debt, which is the world’s third largest and running at more than 1.3 times domestic output.
Banco BPM CEO Giuseppe Castagna told the same event he was not opposed to setting rules limiting the share of a bank’s capital that could be held as government debt.
“The problem is the concentration,” Castagna said.
Core euro zone countries see a reduction of banks’ exposure to their own country’s debt as one of the conditions to progress towards a single banking union in the bloc.
German Finance Minister Olaf Scholz in November proposed that EU law should make sure banks have a financial incentive not to accumulate too much debt of a single sovereign state.
This was aimed at safeguarding them in case a government runs into financial trouble and its bonds become junk, as was the case in Greece during the eurozone crisis. (Reporting by Gianluca Semeraro and Andrea Mandala, editing by James Mackenzie and Alexander Smith)