The sovereign-banks’ feed-back loop  As you may remember, the whole idea of launching a single European supervisor was born in the June 2012 Summit as a consequence of the decision to prepare direct European recapitalisation of weak banks.
The acute situation of liquidity shortage in late 2011 that led us at the ECB to conduct two long-term refinancing operations (LTROs) with a maturity of three years, and the continuing sovereign debt crisis convinced Member States to frontally address the bank-sovereign link, notably by promising the possibility of European capital injections that would not overburden the already indebted sovereigns.