Sovereign Environmental Risk

As a result, sovereign risk is now becoming banking risk.

Traditionally, sovereign risk has been concentrated in emerging market economies.

Investors were not worried about default risk on Spanish or Irish sovereign debt, or about Italy s chronically large sovereign debt.

Eurozone sovereign debt turned out not to be homogenous with respect to risk.

Sharp rises in sovereign, corporate, and interbank liquidity spreads will increase the cost of capital, and increases in risk aversion, volatility, and sovereign risk will undermine business, investor, and consumer confidence further.

The time has come for a better understanding of the connection between environmental and natural resource risk and sovereign credit risk.

The European Commission s claim that this slowdown reflects high sovereign default risk, rather than fiscal consolidation, is belied by the UK, where the sovereign risk is deemed by markets to be virtually nonexistent.

The eurozone s sovereign risk problems could worsen, leading to another round of asset price corrections, global risk aversion, volatility, and financial contagion.

Even if this sounds unfair, it is logical to expect rating agencies, which had been lax in evaluating credit risk, now to be rigorous in assessing all forms of risk, including sovereign risk.

NEW YORK Today s swollen fiscal deficits and public debt are fueling concerns about sovereign risk in many advanced economies.

As a result, sovereign risk today is a greater problem in advanced economies than in most emerging market economies.

Argentina s Sovereign Bondage

In addition, these risks vary widely across countries, including countries whose current credit ratings suggest similar levels of sovereign risk.

But sounder fiscal policy might lead to even higher inflows as the country s external balance and sovereign risk outlook improve.

It would be unfortunate if governments requiring financial institutions to be more prudent in managing risk were at the same time asked to turn a blind eye to sovereign risk.

The euro s rise will soon cause massive pain to the PIIGS, whose recessions will deepen, causing their sovereign risk to rise.

Sovereign spreads are already pricing the risk of a domino effect from Greece to Spain, Portugal, and other euro zone members.

Finally, sovereign risk is rising consider the troubles faced by investors in Dubai, Greece, and other emerging markets and advanced economies.

Greece remains very much a sovereign country, not a sub sovereign state.

If systemic risk can cause this kind of cascading sequential imbalance, then the sovereign needs to be alert, competent at identifying rising systemic risk, and able to take corrective action early.

Of course, some believe that the Fed s mass purchases of US debt poses an even bigger risk than Europe s sovereign debt crisis.

NAIROBI Until the global financial crisis erupted four years ago, sovereign bonds had traditionally been viewed as reliable, virtually risk free investments.

With more than 40 trillion of sovereign debt in global markets at any given time, that is a very high risk game.

The falling yields at the Italian government s last bond auctions in 2011 suggested a significant reduction in the perceived sovereign default risk.

An assessment of sovereign risk that is systematic and data driven could help to spot the risks that changing global headwinds imply.

Investors subsequent efforts to price in the risk of a eurozone breakup not the volume of sovereign debt caused bond yields to spike.

First, sovereign bonds held by banks are treated as risk free assets under EU rules for calculating banks solvency and capital adequacy levels.

21. Emphasizes that it is important for sovereign risk assessments made by private sector agencies to be based on objective and transparent parameters

Those Fickle Sovereign Wealth Funds

Remain independent and genuinely sovereign.

With bonds of peripheral eurozone nations continuing to fall in value, the risk of Irish, Greek, and Portuguese sovereign defaults is higher than ever.

But the metamorphosis tends to go hand in hand with localized monetary contractions that exacerbate the correlated risk of sovereign default and bank failures.

If the EU wants a monetary union in which sovereign debt is relatively homogenous with respect to risk, fiscal discipline must be similarly homogenous.

Because many banks hold a large volume of eurozone government debt, the results will depend very much on how the ECB assesses sovereign risk.

Libya s Shadow on Sovereign Wealth Funds

Sovereign regimes require a political identity.

Should Europe Regulate Sovereign Wealth Funds?

And yet sovereign ratings matter tremendously.

So long as the eurozone s systemic risk is not addressed, sovereign defaults are not unlikely, leading to extended bank bailouts that could carry unacceptable costs.

Most observers cite the authorities concern that if any sovereign does not honor its debts, all sovereign borrowers will be penalized. But such contagion risk is trivial compared to the wildfire that could be ignited by imposing losses on small depositors.

In 2007, Spain and Ireland were models of fiscal rectitude, with far lower debt to GDP ratios than Germany had. Investors were not worried about default risk on Spanish or Irish sovereign debt, or about Italy s chronically large sovereign debt.

And let the sovereign policemen all bandits are sovereign think hard about how to throw it away.

It is likely that growing natural resource scarcities are driving a paradigm shift, with potentially profound implications for economies and thus for sovereign debt risk worldwide.

The ECB s treatment of all such debt as equally powerful sources of back up liquidity now trumps any analysis of differences in long term sovereign risk.