The design of the new financial instrument called Sovereign Bond-Backed Securities (SBBS) was negotiated at the European Parliament, led by S&D MEP Jonás Fernández Álvarez. If adopted by co-legislators, SBBS will help banks to diversify their sovereign exposures and to reduce the link with their home governments. For European citizens this would mean another progressive step towards a more stable and secure economic environment in the Banking Union.
Jonás Fernández Álvarez, S&D lead negotiator on Sovereign Bond-Backed Securities (SBBS), stated:
“Sovereign Bond-Backed Securities are meant to achieve both risk reduction and risk sharing and therefore improve financial stability of the euro area, which we Socialists and Democrats have been claiming for the past years. During the financial crisis, we realised that the euro area banking sector was particularly vulnerable to the sovereign-bank nexus. SBBS would contribute to soften the link between banks and their sovereign, supporting higher portfolio diversification in the financial sector. Additionally, they would render smaller and less liquid markets more attractive for international investors."
Pervenche Berès, S&D Group spokesperson on economic and monetary affairs, added:
“From the financial crisis in 2008, we learnt that we needed to work hard in order to make the financial system more stable and less risky. Backed by a diversified portfolio of euro area central government bonds, the introduction of SBBS would represent a small, but useful, progress in this direction since they are financial instruments that can be used by banks for diversification and risk sharing across the euro area, with only private investors bearing potential losses.”