The impact of the recent financial crisis on EU competition policy for the banking sector

Abstract

PurposeThe purpose of this paper is to discuss the long‐term impact of the recent financial crisis on European Union (EU) competition policy.Design/methodology/approachThe paper, first, discusses the implications for competition from the measures adopted by national governments to address the recent financial crisis. Then, policy responses at EU level are presented and discussed. The paper culminates with a discussion of the future challenges.FindingsThe measures adopted by national governments to address the impact of the crisis on the financial sector and the broader economy, whilst necessary to stabilise the markets and pull the economies out of the recession, have potential adverse effects on competition inter alia by maintaining inefficient companies in the markets and delaying necessary market restructuring. The EU authorities have worked to facilitate the national efforts to address the crisis by adding flexibility to existing EU competition rules but they have declared that distortions of competition should be kept to a minimum. Nevertheless, despite these efforts, the current economic and political environment raises a number of challenges to competition policy which will have to be dealt with in 2010 and the years to come.Originality/valueThe paper contains a critical analysis of the impact on competition policy of the recent financial crisis and puts forward proposals for addressing these challenges. It contributes to the debate between economists and policy‐makers on the role impact of the financial crisis on competition policy.