What EU State Aid Did to Banks’ Viability, Competition and to Overall Financial Stability
The 2008 financial crisis severely affected the European banking sector. To prevent bank failures and wider economic disruption, European Union (EU) Member States provided State aid to 566 banks across twenty-two countries. Between 2007 and 2021, support measures reached nearly €3 trillion.
In an article based on a study commissioned by the European Commission, Elżbieta Głowicka and Thomas Hildebrand explore the key findings of the research, evaluating whether State aid rules achieved their objectives and how they affected the European banking sector.
The authors examine dimensions of State aid interventions including financial stability, bank viability, competition, market discipline, moral hazard and the efficiency of the aid framework.
The findings provide insights into the effectiveness of different forms of State aid, the role of commitments and burden-sharing mechanisms and challenges of balancing financial stability with competition and market discipline. They also contribute to the ongoing discussion on the future of EU State aid rules for banks in difficulty.
