Among other things, the disastrous sovereign-bank nexus would have to be broken. To ensure this, we must do the following. First, we must further strengthen the financial system’s resilience. Second, we must regulate the financial markets strictly and on the basis of uniform rules. Third, we must effectively implement a credible resolution regime for banks.
And lastly, we must end preferential regulatory treatment of government bonds. Progress has already been made with regard to resilience; in particular the implementation of the Basel III capital rules improves banks’ ability to absorb loss. Moreover, the Single Supervisory Mechanism, which is due to be launched in November of this year, offers the opportunity to apply a uniform and rigorous supervisory regime.