Isolating the risks of banking activities – Videoblog 40

Finance Minister Prof. Edward Scicluna explains that the financial crisis had far reaching consequences that are still being addressed to this day by European countries through discussions and joint action by EU Finance Ministers in the ECOFIN.

Prof. Scicluna referred to his participation during a two-day meeting held on the 1st and 2nd April 2014 in Athens. He noted how discussions focused on key economic and financial issues, and especially on banking issues.

He explains that one principle that is currently being discussed with certain urgency is the question whether banks should split conventional banking activities from riskier banking activities, given how the latter led to the financial crisis.

Prof. Scicluna explains the merits of such a split between a bank’s conventional banking activities and riskier activities, which deal with investments and the sale of financial products and which carry a heightened degree of risk.

He explains that the discussions are in a delicate situation given how banks are being requested to grow their capital, along with various other regulatory requirements, and this progress could be disrupted by any ring-fencing of riskier banking activities.

Prof. Scicluna notes that during this discussion in ECOFIN, he called for more caution on the issue, as although there is general agreement to ring-fence retail depositors from the riskier banking activities, the effect of such ring-fencing should be first studied.



– Friday, 11th April, 2014

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