State Aid control in the Financial Sector and Systemic Financial Stability: Rules applied during the Financial Crisis and in the Banking Union

Abstract: State aid is an area of competition law. State aid measures are used to remedy market failures and to help undertakings when they are facing difficulties. State aid control aims at ensuring a level playing field between aided and non-aided firms. During the 2007-2009 financial crisis, several banks have encountered difficulties, and Member States have been forced to help them out through diverse means. The European Commission has been comprehensive and has issued a temporary framework with an expiry date of application to guide Member States and accelerate the aid approval process. Nevertheless, a balance had to be found between protection of the financial stability and maintaining a level playing field. The financial crisis made the European Union realise that it lacked a harmonised set of rules concerning supervision and regulation of credit institutions at Union level. The creation of the Banking Union appears as drawn from a lesson learnt during the crisis.