Using these models, they calculate how risky their assets are. The risk-weighted assets then form the basis for calculating capital requirements. So banks are clearly in favour of risk sensitivity when it comes to determining the adequate level of capital. And I too see merits in that approach. But internal models are complex, and to keep them in check, we need complex rules.
Sovereigns would have less ability to intervene in failing banks, thus allowing bank risk to be better separated from sovereign risk. The third reason that justifies the banking union has to do with the effects of unsupervised cross-border lending on real economic developments.