During the euro debt crisis, banks’ holdings of domestic sovereign debt amplified the transmission of sovereign stress to bank lending and solvency risk in stressed countries. Yet, current proposals to reform European banking regulation of bank sovereign exposures meet with obstacles, some structural–namely, the scarcity and asymmetric provision of safe assets–and others transitional–chiefly the danger that regulatory change may trigger instability in the sovereign debt market. But both types of obstacles can be overcome by introducing a synthetic security resulting from the securitization of euro-area sovereign debt — European Safe Bonds, or ESBies — and by providing regulatory incentives for banks to replace domestic debt holdings with this security.