•  First, it will break the vicious feedback between weak banks and weak sovereigns;  •  Second, it will help restore the proper transmission of monetary policy; and  •  Third, it will improve the incentives for proper supervision and limit the susceptibility to any prospective regulatory capture.
The results of this analytical work show that, on the one hand, the average probability of default (PD) of euro area banks decreased from 3.5% in 2007 to 1.1% in 2017, less than a third of its pre-crisis value.