It should also encompass appropriate capital backing for government bonds – which is another proposal made by Stefan Gerlach, incidentally. But the Single Supervisory Mechanism and suitable regulation are just two elements of a banking union, and there are also other means available for severing the link between sovereigns and banks.
The third tool in this respect is a European recovery and resolution mechanism for banks that has access to “European” funds. In this context, it is necessary that any such mechanism ensure that investors are first in line to bear the risk of their investment decision.