HELSINKI, Jan 22 (Reuters) – Europes next financial crisis may be averted with the help of a new safe asset aimed at breaking a vicious circle of lending by banks to their national governments, the man in charge of creating it said on Monday.
Philip Lane, the head of a taskforce working on a synthetic bond backed by the sovereign debt of all EU countries, said Safe Bond-Backed Securities (SBBS) would give banks in the region an alternative form of collateral to national government bonds.
Seeking to assuage fears in Germany that it could end up paying for other governments debt or bailing out the SBBS issuer in case of market stress, he said the issuing entity must follow strict guidelines and be shielded from political interference.
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