of public debt, at 91 %. and so this is one more reason why effective limits for government debt are urgently needed. binding fiscal rules and an institution that observes their adherence are just one component of a consistent reform agenda. additionally, it is important for capital markets to resume their role of 7 / 9 bis central bankers'speeches disciplining national fiscal policy. as for enterprises, more deeply indebted countries ought to pay higher interest rates. this will only happen if the no - bail - out clause in the maastricht treaty really does have teeth. therefore, it must be possible to restructure public debt without posing major risks to the financial system. the july 2016 edition of the bundesbank ’ s monthly report describes what needs to be done to make this possible. there are two reforms i would now like to mention. first, we need to sever the sovereign - bank nexus. a strong inter - linkage between banks and sovereigns increases the probability of a bail - out by other member states and weakens incentives for risk - oriented pricing. and it is precisely this sovereign - banking nexus that contributed to a mutual intensification of the crisis in the euro area, when banks suffered from declining prices for sovereign bonds in their balance sheets and countries from struggling banks in their territory. the european banking union already marks a huge step towards untangling this dangerous embrace. however, to complement the banking union, it is also crucial that we do away with the preferential treatment of sovereign debt in banking regulation. this implies that, similar to banks ’ lending to the private sector, sovereign exposures will need to be backed by capital and also be part of a large exposures regime. a second measure concerns the design of the european stability mechanism ’ s financial assistance programmes. the esm is there to provide resources to countries that apply for an esm financial assistance programme. however, these funds are generally used not only to cover budget deficits, but also to redeem maturing sovereign bonds. by implication, when a programme is activated, european taxpayers are, in essence, bailing out the respective country ’ s creditors. this does not exactly foster willingness on the part of member states to agree to restructure a programme country ’ s debt. instead of a truly viable solution being reached, when push comes to shove, a strategy of muddling through would win the day. that ’ s why the bundesbank is proposing to add a clause to the government bonds

effective from the beginning of 2015, to disclose the basel iii leverage ratio will enable a direct comparison between large globally active banks. this is why it is essential for banks to have a solid leverage ratio. total capital comprises going - concern loss - absorbing capital ( common equity tier 1 capital plus high - trigger contingent capital instruments ) and low - trigger contingent capital instruments. the latter are primarily aimed at ensuring the maintenance of systemically important functions and the orderly resolution of the residual bank, and are therefore important in a “ gone concern ” perspective. bis central bankers ’ speeches increasing the credibility of model - based risk - weighted assets increasing the credibility of risk - weighted assets ( rwa ) based on banks ’ internal models remains an important goal. as discussed in the 2013 financial stability report, model - based rwa are being called into question by market participants, analysts and authorities worldwide. this is particularly significant as rwa are at the heart of the capital regulations for banks. it is widely accepted that a bank ’ s risks can, in principle, be more accurately quantified using the model - based approach than using the standardised approach. yet banks ’ internal models are highly complex and can vary widely between institutions, thus making it difficult to accurately assess a bank ’ s resilience and compare one bank with another. the snb welcomes the efforts by the swiss big banks to increase transparency with regard to their risks. for example, both institutions recently started to disclose changes in their rwa, broken down by cause. of particular interest is the proportion of the reduction in rwa which is attributable to model adjustments. in addition, credit suisse has been publishing a statistical measure of total loss potential for some time now, and ubs recently started to publish a statistical measure of loss potential by business division and a scenario - based post - stress capital ratio. the snb encourages the big banks to further increase transparency with regard to their risks. it continues to recommend that the big banks disclose rwa according to both the model - based approach and the model - independent standardised approach. this recommendation is in line with increasing efforts being made at international level. disclosing rwa according to the standardised approach would provide market participants with additional information for assessing the level of, and changes in, model - based rwa. in this context, the analysis of rwa being carried out by finma with the support of the snb will play an important role. the big banks have already provided