Assessing the European Banking Sector Bailout Plans
Authors : Noël Amenc Professor of Finance and Director of the EDHEC Risk and Asset Management Research Centre
Samuel Sender Applied Research Manager at the EDHEC Risk and Asset Management Research Centre
In response to a major financial crisis, European governments have put in place measures for the recapitalisation of the banking sector and the shoring up of its liquidity.
These bailout plans pose problems for the European Union, founded as it is on the resumption of market competition not distorted by intervention on the part of its member states. So, even in emergencies, the transactions realised as part of these bailout plans must, to conform to market principles and the European Commission directives on competition, be realised at market prices. In other words, support is permissible, but subsidies are not.