Competition law and policy for the EU banking sector in a period of increased economic uncertainty

Abstract

Purpose The purpose of this article is to discuss the long‐term impact of the current financial and economic crisis on competition in the European Union (EU) banking sector. Design/methodology/approach The article first discusses the long term role of competition in the banking sector, commenting on policy developments prior to the crisis. Then the impact of the crisis is discussed focusing on two main areas of policy state: aids and bank regulation and supervision. The article culminates with the conclusions. Findings The main findings about state aids are that the efforts of the Commission to ensure that aided companies would not use the government support to distort competition seem to be working. However, given that the full impact on competition of these aids may take years to be felt, the Commission should be prepared to take action where necessary to ensure that competition will be protected. The provision of state aids could not have been avoided due to the grave systemic risks associated with bank failures. In respect of regulation and supervision, the article concluded that there is a lot of work to be done in this area to ensure that mistakes that led to the crisis will not be repeated but also that there is need for the Commission to ensure that the reforms to the regulatory and supervisory architecture do not occur at the expense of competition. Originality/value The article contains proposals about policy adjustments, thus contributing to the ongoing debate about the role of competition policy in the efforts to address the impact of the crisis.

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