Preserving cross-border banking in the face of the crisis: State aid policy under the financial trilemma

François-Charles Laprévote and Sven Frisch

Chapter 7 in Research Handbook on State Aid in the Banking Sector, 2017, pp 186-216 from Edward Elgar Publishing

Abstract: When the financial crisis struck, the European Union lacked a comprehensive supranational regulatory and bank resolution framework. While EU-based banks operated on a cross-border basis, crisis management and resolution tools remained national in scope. Using the concept of the ‘financial trilemma’, we argue that the Commission’s crisis-time State aid policy sought to fill this void by both leaving Member States enough leeway to restore financial stability and coordinating their interventions to preserve cross-border banking, in line with constitutional market integration objectives. But the limits of State aid law and an often reactive approach to national interventions meant that the scope, overall coherence, and effective contribution of the Commission’s State aid decisions to market integration objectives varied from case to case.

Keywords: Economics and Finance; Law - Academic (search for similar items in EconPapers)
Date: 2017
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