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REGULATION AND COMPETITION POLICY - page 5 / 37

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implementation of the single financial market in the EU is being slow and that this may hinder competition.1

The paper starts with a brief review of the academic literature on competition and stability in banking, discussing the rationale for regulating the banking sector in Section 2, the competitive mechanisms specific to the sector in Section 3, and the potential trade- off between competition and stability in Section 4. The discussion highlights how the literature is moving away from the traditional view that competition hurts stability. However, results are still too inconclusive to generate clear policy implications except for the need to enforce competition policy in banking.

After doing that, the paper describes the normative arrangements of competition policy in the banking sector in Europe in Section 5; and in Section 6 it reviews the most important cases analyzed by the Commission in the financial sector. Given the structure of the financial sector across Europe, mergers and cartels have played so far a much greater role. We first describe the evolution of the concentration process in Section 6.1 and then look in Section 6.2 at cases which involved conflicts between the Commission and the Member States. Concerning cartels we review in Section 6.3 the so-called “Lombard Club” in Austria, various cases involving Visa International and the recent examination against the Groupement des Cartes Bancaires. Then, in Section 6.4 we move to the description of the case of abuse of dominance position investigated by the Commission against Clearstream. Finally in Section 6.5 we turn to state aid, and describe the two important cases of Credit Lyonnais and of the capital transfers to the German Landesbanken in the early 80s. It is in the area of state aid that stability and competition considerations come directly into play and restructuring of banks in financial difficulties assumes a special connotation. Before concluding we turn in Section 7 to the issues of financial integration and current developments in financial regulation and supervision,

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Competition problems may also arise in trading, securities services and the organization of exchanges. Those, however, are out of the scope of the present paper.

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