Competition Policy and Sector-Specific Regulation in the Financial Sector

Martin Hellwig

No 2018_07, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: Reforms of financial regulation after the crisis of 2007-2009 raise the question of what is the relation between financial regulators and competition authorities. Should competition authorities play a role in financial regulation? Should they co-operate with financial regulators? Or should they keep at a distance? The paper gives an overview over some of the issues that are involved in the discussion. Drawing on the experience of the network industries, the first part of the paper discusses the relation between competition authorities and sector-specific regulators more generally. Whereas competition policy involves the application of legal norms involving prohibitions that are formulated in abstract terms, sector-specific regulation involves authorities actually prescribing desired modes of behavior. The ongoing nature of relations makes regulators more prone to capture than competition authorities. In the financial sector, the potential for capture is particularly great because everyone is tempted by the idea that banks should fund their pet projects. Following an overview over the evolution of regulation and competition in the financial industry, the paper discusses various issues that are relevant for competition policy: Technological and regulatory barriers to entry, distortions of competition by explicit or implicit government guarantees, distortions of competition by bailouts making for artificial barriers to exit. Guarantees and bailouts in particular pose special challenges for merger control and for state aid control.

Keywords: Financial Regulation; Competition Policy; Government Guarantees; Bank Bailouts; State Aid Control (search for similar items in EconPapers)
JEL-codes: G28 K21 K23 L40 L50 (search for similar items in EconPapers)
Date: 2018-07
New Economics Papers: this item is included in nep-ban, nep-com and nep-law
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.coll.mpg.de/pdf_dat/2018_07online.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mpg:wpaper:2018_07

Access Statistics for this paper

More papers in Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods Contact information at EDIRC.
Bibliographic data for series maintained by Marc Martin ().