Friday, May 21, 2010
Financial Crisis Remedies in the European Union: Balancing Competition and Regulation in the Conditionality of Bailout Plans
Posted by D. Daniel Sokol
Damien Gerard, Law, Louvain University, has posted Financial Crisis Remedies in the European Union: Balancing Competition and Regulation in the Conditionality of Bailout Plans.
ABSTRACT: This contribution illustrates the European Commission’s reliance on EU state aid rules to pursue a complex mix of competition and regulatory objectives in the framework of the financial crisis. Section 1 sketches the framework that enabled the Commission to review bailout plans and condition their implementation. Section 2 then shows how the Commission attempted to address some of the regulatory failures that allowed for “unrestricted and exaggerated risk taking” (dixit Commissioner Kroes) by credit institutions. Section 3 explains, subsequently, how the Commission undertook to prevent or mitigate market distorting effects resulting from the implementation of bailout plans. In closing, Section 4 questions some of the competition policy options pursued by the Commission in dealing with the crisis, notably with regards to compatibility with the EU internal market policy. The contribution also points to various instances where the conditions imposed and/or negotiated by the Commission impacted on the structure of credit institutions and their business practices (including retail banking services), with potentially long-term consequences.