The links between public debt and banks remain, says former UBS CEO

Ten years from the global financial crisis of 2008, the links between public debt and banks still remain, Peter Wuffli, the former CEO of UBS, told CNBC on Friday.

Wuffli said that remains a major risk for Europe.

“There is still, in a way, too much incentive for banks to invest into government bonds, and therefore not enough pressure to really put governments into a situation to do reforms on their state finance” Wuffli, now a vice chairman of the board of directors at private equity firm Partners Group, said at the annual Singapore Summit.

“Looking in Europe, that’s currently the biggest risk,” he said, pointing to Italy where there is “still no risk premium on holding government bonds, for a bank.”

He said it would be “much better for the system” if bonds were not looked at as “risk free,” so institutions invested in other kinds of assets.