'The Bundesbank chief also called for euro zone governments to sever what he describes as the "excessively close links" between banks and sovereign governments, saying that European banks hold too many of their own governments' bonds.'<blockquote>' "To fully unleash the common currency's potential, efforts are needed on two fronts: structural reforms as well as the abolition of implicit guarantees for banks and sovereigns (government bonds)," Weidmann said.
"In addition to stronger rules, we need to make sure that in a system of national control and national responsibility, sovereign default is possible without bringing down the financial system. Only then will we really do away with the implicit guarantee for sovereigns."
The Bundesbank chief also called for euro zone governments to sever what he describes as the "excessively close links" between banks and sovereign governments, saying that European banks hold too many of their own governments' bonds.
"This is because banks do not have to hold any capital against their government debt, as the risk-weight assigned to sovereign bonds is zero.
To counteract excessive investment in sovereign bonds, Weidmann believes that the capital rules need to be changed to take account of risk and exposure levels.
"Only then will banks be able to cope with the repercussions of sovereign default." '
- Ingrid Melander, Michel Rose (and Paul Carrel),
ECB cannot solve euro zone crisis: Bundesbank chief, July 7, 2013</blockquote>
Context Banking Reform<blockquote>'Weidmann wants to see the connection between banks and sovereigns severed, a connection that has been fostered by governments over many centuries in order to enable them to spend more than they take in through tax revenues.'
- Acting Man,
Central Banks – Words and Deeds, July 8, 2013
'..The obvious implication is banks are capital impaired right now, but impairment is hidden via of absurd zero-risk weightings on bonds.'
- Mish (
Bundesbank Chief States the Obvious "ECB Cannot Solve Euro Zone Crisis".., July 07, 2013)
The Problem of the Freedom of the Banks'..the theorem of the economic impossibility of socialism .. is fully applicable to central banks..'(Haptopraxeology) - '..the near entirety of the social science community betrayed humanity .. failed .. to fulfill their vital scientific duty..'</blockquote>