In his weekly video blog, Finance Minister Prof. Edward Scicluna discusses the recent agreement reached by EU Finance Ministers regarding the Banking Resolution Framework Directive.

He explains why, in the eventuality that a bank might collapse, the ideal way forward lies in a compromise between the bail-in approach (where the financial burden is shifted to the bank’s shareholders and creditors),  and the bail-out (where the burden is shouldered by the state).

He also discusses the importance of a safety ‘net’ for bank depositors, and how all depositors should be protected in this way in eventuality that the bank fails at all cost, irrespective of the deposit size.

Prof. Scicluna also explains that the Banking Resolution Directive will mean that banks will now start setting aside funds to protect both small and large depositors – the former through a Guarantee Fund, and the latter through a Resolution Fund.

– Monday, 1st July, 2013