The Changing Role of Central Banks and the Role of Competition in Financial Regulation During (and in the Aftermath of) the Financial Crisis

Marianne Ojo

The importance attached to maintaining and promoting financial stability - as well as the need to facilitate rescue and restructuring measures aimed at preventing systemically relevant financial institutions from failure, demonstrate how far authorities are willing to overlook certain competition policies. However increased government and central bank intervention also simultaneously trigger the usual concerns - which include moral hazard and the danger of serving as long term substitutes for market discipline. An interesting observation derives from the relationship between State aid grants, competition, and the potential to induce higher risk taking levels. Whilst the need to promote and maintain financial stability is paramount, safeguards need to be implemented and enforced to ensure that measures geared towards the aim of sustaining system stability (measures such as lender of last resort arrangements and State rescues) do not unduly distort competition as well as induce higher risk taking levels. This paper will draw attention to safeguards which have been provided by the Commission where approval is considered for the grant of State aid to financial institutions whose problems are attributable to inefficiencies, poor asset liability management or risky strategies.

Mots clés: Social Sciences & Humanities

Marianne Ojo. The Changing Role of Central Banks and the Role of Competition in Financial Regulation During (and in the Aftermath of) the Financial Crisis. European Law Journal, 2011, 17 (4), pp.513. ⟨10.1111/j.1468-0386.2011.00563.x⟩. ⟨hal-00659895⟩