Sant warns against ‘risk of averseness’ among EU financial institutions

Labour MP Alfred Sant has said Europe must avoid an increase of “viscosity” in its financial systems, citing risk-averse policies that demand banks to provide credit for investment but also prudence from extending money to certain industries.

“On the one hand, the EU is telling banks and financial institutions to be proactive in their approach to proposals for economic expansion. On the other hand, the EU is also telling them that they must follow new prudential ways of doing business,” Sant said, addressing the European Parliament during the debate on ‘Transparency of securities financing transactions’.

Sant told the European Parliament that he would like to have a greater assurance that this bill, necessary as it is, will not serve to further encourage risk averseness among our financial institutions.

“Banks have an important role to encourage more investment in the European economy and they are still expected to be behind the big investment leap forward that Europe needs to take. Such a leap could falter if the EU seems to be sending mixed messages.

“Most measures contemplated in the report go back to the banks. We obviously need banks and financial institutions that operate according to transparent rules that take full account of prudential concerns. However, we are also experiencing deflation. Europe faces a huge investment gap. Transparency and prudence should not lead to an increase of viscosity in European financial systems.”

Sant said that a fine balance had to be maintained between potentially divergent concerns. “The introduction of new systems of surveillance as with this report covering security financial transaction markets, may be necessary. Yet we need to ensure that it is consonant with the economic needs of the times.”