Tackling the financial crisis

April 30, 2011 - PRLog -- Tackling the financial crisis
State aid

In recent months, Member States have taken significant measures to support the European financial sector. Almost EUR 3 trillion of State guarantees had been provided to European Banks by 18 Member States under schemes approved by the Commission by September 2009. This is in addition to over EUR 300 billion in capital injections from Member State governments.

The control of these aids ensures these measures do not destroy the level playing field between aid recipients and their competitors, whether based in their own or in other Member States. By exercising State aid control in a flexible fashion but based on solid competition principles, we are safeguarding the economic and practical benefits of Europe's internal market.

Were the State aid rules not to apply, we would see a subsidy race and unfair damage to healthier companies. State aid and other competition rules will continue to apply in order to avoid such a scenario.

The Commission has set out standards and safeguards for the assessment of State aid to financial institutions in the current crisis. It has also set out guidance on dealing with the impaired assets held by banks and on the assessment of restructuring plans for banks that have received assistance. See the legislation page for more details.

In the longer term the sector needs new business models and new regulation for a sustainable future.

Merger control

The proper application of the merger control rules is as necessary as ever. These rules play an important role in ensuring the protection of consumer welfare in terms of lower prices, better products and services and increased innovation. The necessity of maintaining or restoring competitive markets in the medium to long term is not at odds with the need for financial and economic stability in the short term. On the contrary, it forms part of the solution to the problem of market inefficiencies and, as we have seen, market failures. The Commission is therefore committed to continue to apply the existing merger control rules, while taking full account of the economic environment.

Acquisitions by States of majority stakes in banks are scrutinised under the Merger Regulation where control is acquired and the State does not maintain the acquired entities as independent commercial entities. With one exception involving the take-over of a bank in Germany (Hypo Real Estate) all cases on which the Commission has been consulted in this respect have been provisionally considered not to fall under the Commission's jurisdiction.

The existing merger control rules allow for all the necessary flexibility to deal with sometimes rapidly evolving market conditions. As regards procedure, transactions that require fast treatment, such as those which are part of rescue operations, can be dealt with within a swift timeframe and can where necessary exceptionally be granted a derogation from the stand-still obligation pending a review (in order to enable immediate partial or full implementation of these transactions in urgent cases).
On substance, the EU merger control rules allow the Commission to fully take into account rapidly evolving market conditions and, where applicable, the failing firm defence.

So far there has been relatively little merger activity in the financial services sector as a result of the crisis. Going forward, however, it can be expected that there will be a significant increase in this activity once market conditions have stabilised.

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