peter praet : interview in la stampa interview with mr peter praet, member of the executive board of the european central bank, in la stampa, published on 22 december 2013. * * * draghi said recently that for the aqr the sovereign bonds will be treated as neutral, but that they will be considered as a risky asset for the stress test. what could it mean for italian banks? “ i can ’ t comment on this, as even the parameter have not been decided, yet and the stress test will be a joint exercise with the european banking authority ( eba ). what i can say is that, in general, banks have to manage their risks. the stress test by definition stresses the entire portfolio of the banks, thus including sovereign debt ”. don ’ t you think that the omt should also change your perspective, when you judge government bonds detained by banks? “ i would not link the two things. the omt has obviously had a consequence on the pricing of sovereign bonds, to the extent that it has removed from the spread that certain governments have to pay the compensation for the probability that a “ catastrophic risk ” scenario may materialise : the probability that they may leave the euro area. stress tests are never made for dealing with “ end - of - the world ” scenarios, but with plausible events, as adverse as they can be ”. the ecb mentioned the possibility of a conditioned ltro, “ british style ”, a “ funding for lending ” ltro, but what are you exactly thinking of? “ it is clear that when a central bank provides liquidity to the banking sector, it expects the banking sector to transmit the liquidity stimulus, in volume and in prices, to the economy. but on the other hand you cannot really force the banks to lend to the real economy when there is a problem on the demand side, when the perceived risk that banks attach to a loan is simply too high. you also don ’ t want that the liquidity injections lead the banks to take excessive risks elsewhere. analysts often mention sovereigns, but i am not thinking only about that. i think, as also draghi said, that putting “ conditions ” on ltro is complicated for all these reasons. for me the essential is to analyse if and how risks are properly priced and managed by banks ”. how ’ s the situation in the credit market? “ on lending to the real economy, what in particular needs to be

we will consider those comments together with any comments submitted on the re - proposals as part of any final rulemakings. this is an interim step. let me reiterate that we are open to comments on any aspect of the proposals. now, i will turn to the changes. credit risk i will begin with an overview of the changes i will recommend to the capital requirements for credit risk, which protect against the risk that a bank's loans will not be fully repaid. these changes include reducing the risk - weights for residential real estate and retail exposures, extending the scope of the reduced risk weight for certain low - risk corporate debt, and eliminating the minimum haircut for securities financing transactions. first, i intend to recommend that the board lower the proposed risk - weighting for loans secured by residential real estate and loans to retail customers. the original proposal introduced more risk - sensitive approaches for residential real estate and retail exposures, but calibrated them to be higher than the basel standard to promote domestic competitive equity. the agencies received significant comments on the proposed calibrations. some commenters argued that the elevated risk weights would overstate the risk for these loans given their loss history. others argued that the risk weighting would affect home affordability and homeownership opportunities, particularly 2 / 8 bis - central bankers'speeches for first - time homebuyers, minority communities, and low - and moderate - income borrowers, and could reduce the availability and affordability of retail credit. i will recommend that we reduce the calibration for residential real estate exposures so that it is in line with the calibration developed in the basel process. with this change, allin capital requirements, including for operational and credit risk, will be lower on average than they are currently for mortgages up to 90 percent loan - to - value ratio, and about the same as they are now for mortgages up to 100 percent loan - to - value. with respect to loans to retail customers, i intend to recommend that we adopt the basel standard, with two exceptions – first, we would lower the capital requirements for credit card exposures where the borrower uses only a small portion of the commitment line, and second, we would lower the capital requirement for charge cards with no pre - set credit limits. the second proposed change related to credit risk would extend the reduced risk weight for low - risk corporate exposures to certain regulated entities that a bank judges to be investment grade and