EIRP Proceedings, Vol 6 (2011)

Abstract

The decline of traditional banking activities raise the issue of efficiency of financial stability, in terms of
quantitative and qualitative aspects – the increasing danger of banking failures as well as of susceptibility due to
increased propensity of banking institutions to assume additional to risks either in the form of riskier loans offer or
engaging in other "non-traditional" financial activities which give a promise for greater profitability, but also higher
risks. Non-traditional activities of banking as financial products dealers (financial derivatives), generate an increasing
risks and vulnerabilities in the form of moral hazard issues. That is the reason why and these activities should be
regulated as well as are the traditional activities. Challenges posed by the decline of traditional banking activities is
twofold: the stability of the banking system must be maintained, while the banking system needs to be restructured to
achieve financial stability in the long run. One possible way is an appropriate regulatory framework to encourage a
transition period of changing the structure of banking activity(reduction of traditional activities and expanding non
traditional activities) to enable banking institutions to perform a deep methodic analysis of non traditional activities,
oriented to the financial banking efficiency.