1.4.1.5 An enabling framework for the development of SBBS

On 24 May 2018, the Commission published a proposal for a regulation on sovereign bond-backed securities (SBBSs).1 SBBSs aim to further integrate and diversify financial markets across national borders by further weak ening the sovereign – bank nexus and enhance the supply of euro-denominated low-risk assets, thus enhancing the efficiency and resilience of the Eurozone financial system.2 SBBSs would be created by the private sector. A private sector entity would assemble an underlying portfolio of sovereign bonds of all EU Member States whose currency is the euro and would subsequently transfer them to a legally separate, self-standing entity, specifically set up for the sole purpose of issuing to investors a series of securities representing claims on the proceeds from this underlying portfolio. SBBSs would not rely on any risk sharing or fiscal mutualisation between Member States. Only private investors would share risks and possible losses. SBBSs are therefore different from Eurobonds.3 At the time of writing this dissertation, the proposal is being discussed within the Council.