Business · Markets · 1 day ago
European regulators increase checks on banks’ sovereign bond risks
Banks hold large amounts of government bonds.
When interest rates rise, the market value of older bonds can fall.
The EBA says banks’ interest income is offsetting much of that effect, and it has not seen banks suffer so far.
Supervisors are checking how banks manage and protect themselves from these risks.
European supervisors are carrying out additional checks on banks’ risks from sovereign bond holdings.
EBA chair François-Louis Michaud said the eurozone banks’ exposure to sovereign debt is contained.
Interest income is largely offsetting the effect of falling bond prices on banks’ equity values, he said.
European banks held about €4 trillion in sovereign bonds at the end of 2025, equal to 13% of their assets.
EU proposals would introduce capital requirements for concentrated exposures to sovereign debt.
- Who
- European banking supervisors are checking banks’ sovereign bond risks. EBA chair François-Louis Michaud described the oversight.
- What
- Supervisors are making additional checks on risks linked to banks’ sovereign bond portfolios.
- When
- The checks are under way; the article was published on 9 October 2026.
- Where
- Europe, including eurozone banks.
- Why
- Rising bond yields amid higher interest rates have increased concerns about sovereign bond risks.
This story does not have two clearly opposing sides.
That is what supervisors are doing.
So far, we do not see banks suffering the consequences of what is happening, and we are convinced that supervisors are doing what they should in this area.
One thing is the technical treatment, and another is how you manage your balance sheet as a whole.
Of course, there are discussions between supervisors and banks about their exposure to sovereign bond yields, as well as how they manage and hedge those risks; there are also policy tools that can be used.
European banks held about €4 trillion in sovereign bonds, equal to 13% of their assets.
Expansión reported that European supervisors were carrying out additional checks on banks’ sovereign bond risks.
- Holdings
- About €4 trillion in sovereign bonds at end of 2025
- Share of assets
- 13% of European banks’ assets
- Exposure assessment
- Michaud described eurozone banks’ sovereign debt exposure as contained
- Regulatory proposal
- EU measures propose capital requirements for concentrated exposures
Sources
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