hand, allowing banks to perform their essential risk - taking activities, including the extension of risky credit. optimal risk - taking on the part of our banks means that some mistakes will be made and some institutions will fail. indeed, even if a bank is well - managed, optimal risk - taking means that such a bank can simply get unlucky. either through mistakes of management or through the vagaries of economic luck, bank failure will occur, and such failure should be viewed as part of a natural process within our competitive system. just as regulators and legislators must accept failure, they also must not, in their zealousness to maintain a safe and sound financial system, artificially restrict competition among banks or between banks and their nonbank counterparts. for example, we should not repeat the experiment with “ micromanagement ” of bank activities that was embodied in the 1991 fdicia legislation, much of which was repealed in the 1994 banking legislation. in this regard, so long as we do not place artificial regulatory roadblocks in their way, i am not overly concerned with the ability of our smaller banks to compete with their large, regional or national counterparts. our research shows that, when a large bank enters a new market through acquisition of an existing smaller institution, typically lending to small businesses initially declines. but then existing community banks take up the slack by lending to the borrowers spurned by the larger organization. indeed, several community bankers have commented that they welcome the entry of large institutions into their markets via the acquisition route, seeing it as an opportunity to acquire some of the customer base that often is lost by the newly acquired bank. the dual banking system and the importance of choice of federal regulators just as our decentralized banking structure is a key to the robustness of our macroeconomy, a key to the effectiveness of our banking structure is what we term the dual banking system. our system of both federal and state regulation of banks has fostered a steady stream of innovations that likely would not have proceeded as rapidly or as effectively if our regulatory structure were characterized by a monolithic federal regulator. for example, the now account was invented by a state - chartered bank. also, the liberalization of prohibitions against interstate banking has its origin in the so - called “ regional compacts ” that permitted interstate affiliations for banking companies in consenting states. adjustable rate mortgages are yet another example of innovation at the state level that has benefitted financial institutions and their customers.

productivity and stability for sustainable growth address by dr mario vella governor, central bank of malta delivered during the ifs annual dinner 18 november 2016 dear president and members of the committee of institute of financial services ( ifs ) malta, personally and on behalf of the board of directors of the central bank of malta and of its senior management, i thank you for the opportunity to address this distinguished audience. dear minister. ladies and gentlemen. this annual event brings together key stakeholders in this country ’ s economic development and growth, and in the development of the social, educational and cultural conditions without which economic development and growth are not possible. it is now an established tradition that the governor of the central bank seizes the opportunity of the annual dinner of ifs malta to make a number of factually grounded remarks about some matters in the remit of the central bank. the traditional presence of the minister of finance at this event is of vital importance because it provides the stakeholders present with a more dynamic view of the whole, in the light of the statutorily distinct roles of the ministry of finance and the central bank. before sharing some thoughts with you, i would like to commend ifs for its ongoing commitment to responding to the changing needs of the marketplace and its pursuit of excellence in the provision of financial services education. it is encouraging to hear that the institute has had a successful year and that you are working on new initiatives to promote even higher professional standards. this is most welcome, as education and professional development are fundamental to the sustainability of our financial sector and its continued success. your strategic partnerships with the university of malta and overseas professional bodies such as the european banking & financial services training association ( ebtn ), the london institute of banking and finance, and the global association of risk professionals page 1 of 8 ( garp ) - whose representatives are with us tonight - reflects the institute ’ s excellent reputation. that a committee member of ifs - malta has been elected to the highest decision making body of a european association for a third consecutive term confirms the institute ’ s integrity and professionalism. the central bank has always worked closely with ifs and will continue to support its activities. this year, we also cooperated with the ifs during the european money week to promote financial literacy to underprivileged youths and participated in the successful ifs malta annual seminar on pension reform. i look forward to even more cooperation in the future. mr president, well done and thank you for taking a