FRANKFURT, Oct 1 (Reuters) - Euro zone sovereign bonds will be regarded as risk-free again when markets are convinced that the member states will stick to sound budget policies, European Central Bank Executive Board member Benoit Coeure said on Monday.
"Through the restoration of fiscal discipline and implementation of structural reforms, euro area sovereign debt will be viewed once again as risk-free and thus contribute to a collateral supply of good quality," Coeure said in the text of the speech to be given at the Dutch central bank.
Financial markets have increasingly begun to doubt the viability of some countries' debt and their borrowing costs having shot up, pushing five of them to seek for aid from European partners.
Coeure also said that currently some euro zone banks are suffering from lack of collateral.
"Collateral scarcity has become a concern for many euro area banks," Coeure, who joined the ECB at the beginning of the year, also said, adding that those banks are usually located in the crisis-hit countries.
(To read the full speech, click on )
(Reporting by Sakari Suoninen and Eva Kuehnen)
Keywords: ECB/COUERE COLLATERAL