Research Handbook on State Aid in the Banking Sector
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Research Handbook on State Aid in the Banking Sector

Edited by François-Charles Laprévote, Joanna Gray and Francesco De Cecco

The Research Handbook on State Aid in the Banking Sector brings together experts in state aid and in financial regulation, drawn from legal academia, legal practice, economics, and from the EU and EEA institutions to shed light on this relationship. The editors and expert contributors do this by elucidating key concepts that underpin the application of state aid law to banks, and by considering specific aspects of the interface between state aid and financial regulation. The Research Handbook's analysis is complemented by a number of key country-based case studies, and by a concluding section which takes stock of the Banking Union’s package of legislative/regulatory reforms and reflects on the possible future role of state aid in this sector.
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Chapter 2: Competition, stability and moral hazard: the tension between financial regulation and State aid control

Joanna Gray and Francesco de Cecco

Abstract

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.

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