Joanna Gray and Francesco de Cecco
This chapter explores the challenges presented by the interplay between State aid control and financial regulation. While, during the financial crisis, State aid law and policy demonstrated remarkable openness towards the conceptual toolkit of financial regulation, the uncertain contours of concepts such as systemic risk and moral hazard affected the degree of congruence between theory, policy and practice. What is more, the presence of multiple regulatory objectives tended to present the European Commission with some difficult trade-offs in attempting to pursue stability, the prevention of moral hazard and the preservation of lending to the real economy simultaneously, while attempting to minimize distortions of competition.
The Role of Law and the Failure of Northern Rock
Edited by Joanna Gray and Orkun Akseli
T.T. Arvind, Joanna Gray and Sarah Wilson
This chapter compares the UK’s response to mid-nineteenth-century banking failures and the post-2008 banking crisis. Our focus is on the official narratives of cause and effect that emerged in the aftermath of each crisis, and the thrust and direction of the measures taken by regulators and courts in the response to each crisis. We argue that contrary to the standard understanding, official responses to financial instability during the Victorian crises reveal the same concern with systemic issues and systemic stability as responses to the post-2008 crisis. Official reviews, case law, and administrative decisions during the Victorian period – and particularly the 1850s – show a clear understanding of and concern about systemic risk and contagion, and of the importance of bolstering the system through the quality and character of management within individual institutions. Despite the similarity of the Victorian and modern understandings, however, the Victorians framed very different prophylactic institutional reforms to curb the likelihood of future systemic shocks. We juxtapose the differing responses to episodes of financial crisis and failure, which are so distant in time and yet demonstrate remarkably similar demands both for accountability at law for the past and for law to help ensure a safer future, and argue that there is sound reason to play close attention to the lessons the Victorian approach might have to offer.