Of course, banks don't all have to make the same choice with respect to capital levels, but they should pay the appropriate price in the market for lower levels of capital relative to risk. At any rate, it is important that an appropriate level of disclosure requirements be included in pillar 1 to facilitate such market discipline.
And, when the monetary policy reins have to be tightened due to increasing price pressure, the 2/9  BIS central bankers' speeches  Eurosystem could come under political pressure to make high levels of debt sustainable through low interest rates. This, however, would put price stability at risk. Against this backdrop, it is essential that the Eurosystem is independent.