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That's an atrocious article from Bloomberg, and the accompanying video is just cringeworthy. Reuters does a better job of explaining what the issue is:
Banks in the EU don't have to hold capital against holdings of their own government's bonds, a rule known as zero risk weight, as such domestic debt is considered "risk free".

The government said in its SI published on Tuesday that if Britain leaves the bloc with no transition deal next March, the EU would automatically become a "third country".

This means that the zero risk weight rule would no longer apply to EU banks in Britain.

"Therefore, this SI will remove preferential treatment for EU27 exposures," the document said.

As far as I can tell this applies only to UK subsidiaries of EU27 banks holding bonds of their parent's home country in their UK portfolio.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Fri Aug 24th, 2018 at 04:25:03 PM EST
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