Regulation and Competition Policy in the Banking Sector*
Elena Carletti and Xavier Vives♣
Abstract The banking sector has long been exempted from the application of competition policy because of the potential trade-off between competition and stability. In this paper we review the academic literature on this issue, we describe the design of competition policy in Europe and its application in the EU in the last two decades. The analysis highlights that competition policy is now taken seriously in the financial sector. The European Commission has by now investigated mergers, cartels, abuses, and state aids in this sector, and it has taken some landmark decisions. Still, much remains to be done in terms of academic research and of the role that the European Commission can play in fostering competition in banking in Europe.
Prepared for the Public-Private Research Center IESE Business School Conference “Fifty years of the Treaty: Assessment and Perspectives of Competition Policy in Europe,” November 19-20, 2007, Barcelona and the book Competition Policy in Europe Fifty Years after the Treaty. We thank Arnoud Boot and Nicholas Veron for very helpful comments, and Mireia Raluy and Radomir Todorov for excellent research assistance.
Corresponding addresses: Elena Carletti, Center for Financial Studies, University of Frankfurt, Mertostrasse 17-21, 60325 Frankfurt, Germany, email: email@example.com; Xavier Vives: IESE Business School, Av. Pearson, 21, 08034 Barcelona, Spain, email: firstname.lastname@example.org.
IESE Business School-University of Navarra - 1