From State Aid Control to the Regulation of the European Banking System—DG Comp and the Restructuring of Banks

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Series Details Volume 6, Number 1, Pages 285-307
Publication Date January 2010
ISSN 1744-1056
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"During the financial crisis, the European Commission has used its position under EC state aid law to assume a uniquely powerful role with enormous responsbility: while states all over the world struggle to agree on the appropriate means and level of regulation and supervision of the banking sector in order to ensure that banks do not become “systemic” or “too big too fail” in the future, Competition Commissioner Neelie Kroes and her state aid staff have taken the lead and happily prescribe the restructuring measures to banks that they seem fit to tackle the problems lying at the origin of the crisis. The Commission has turned from a supervisor of national state aid measures into a supervisor of restructuring efforts of individual banks. Over the past months, this new objective of DG Competition’s state aid policy has been explicitly expressed by Ms Kroes on some occasions. The Commission’s general approach to examining the necessary restructuring efforts of banks in individual cases is set out in the Commission’s recently published Restructuring Communication. The application of this Communication will be decisive for the success or failure of the Commission’s state aid policy in the banking sector during the financial crisis.
The Restructuring Communication and the—still very few—publicly accessible final Commission decisions on restructuring plans reveal that banks benefiting from state aid are facing considerable changes to their business model and their commercial behaviour, as well as significant cuts to the size of their future operations. This article aims to give an overview of the Commission’s treatment of state aid measures to banks in times of crisis, and of the resulting restructuring obligations for state-supported banks."
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