Bank-Capital Rule on Sovereign Debt Targeted by EU Lawmakers

European Union lawmakers are seeking to close a loophole in bank-capital rules that allows lenders to escape holding reserves against possible losses on the crisis-hit region’s sovereign debt.

A European Parliament committee will discuss overhauling the measure to ensure that lenders hold enough capital to reflect the true risks of government bonds on their books, according to two of its members. Still, they said any measures should only take effect after the current market turmoil subsides to avoid compounding the EU’s fiscal woes.