Basel III and Solvency II [20]

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Bullet points include: Solvency II could reduce demand for banks' long-term instruments at a time when banks most need to issue them Concern shared by regulators and market participants Solvency II standard formula SCR credit spread risk requirement depends (roughly proportionately) on rating and on duration EEA sovereign bonds (and equivalents) are zero rated irrespective of credit rating (in Pillar 1) Basel III likely to affect banks' demand for and supply of certain types of debt Covered bonds favoured relative to unsecured

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