BRUSSELS (Reuters) - The European Commission proposed on Thursday to set up a new class of sovereign bond-backed securities to encourage banks and investors to diversify their holdings of euro zone bonds.
The plan is meant to address a weakness in the currency bloc that came to light in the 2010-2012 euro zone debt crisis, when banks' high exposure to their sovereigns' own debt exacerbated the problems facing banks and euro zone authorities alike.
EU officials said the new product would reduce investors' bias towards their own countries and increase the financial stability of the euro zone.