Advanced Search
MyIDEAS: Login

Liquidity Assistance and the Provision of State Aid to Financial Institutions

Contents:

Author Info

  • Marianne Ojo

    ()
    (Center for European Law and Politics (ZERP), Oxford Brookes, University of Bremen)

Abstract

In response to the recent Financial Crisis -after it had been widely accepted that "a serious disturbance in the economy of Member States" had occurred, and that several measures were required to remedy this disturbance, various Commission communications were adopted and these include: The Communication on the application of State aid rules to measures taken in relation to financial institutions in the context of the current global financial crisis (hereinafter "the Banking Communication"), its Communication on the recapitalization of financial institutions in the current financial crisis: limitation of aid to the minimum necessary and safeguards against undue distortions of competition (hereinafter "the Recapitalization Communication"), and its Communication on the return to viability and the assessment of restructuring measures in the financial sector in the current crisis under the State aid rules (hereinafter "the Restructuring Communication")." The Banking Communication will constitute the focus of this study. Are rescue aids (as distinguished from other forms of State aids) justified even where the possibility exists that rescue attempts are unlikely to succeed? Should rescue aids still be granted at a point when other measures such as winding down measures and the provision of other forms of liquidity assistance could be introduced? At what point should the Government decide upon the nationalization of ailing institutions? Furthermore, should State aids be provided to all classes of financial institutions which are considered to qualify for such aid – as stated within the Banking Communication? These questions interalia constitute questions which are not only raised in this paper, but which this paper aims to address through a consideration of different State aid rescue and restructuring measures, as well as reference to two rescue aid cases, namely those of Bradford & Bingley (State aid NN 41/2008 – United Kingdom Rescue Aid to Bradford & Bingley) and Hypo Real Estate (State aid NN 44/2008 – Germany Rescue Aid for Hypo Real Estate). In addition, the impact of the recent crisis on the choice of legislation and legal basis for compatibility assessments will be highlighted. Whereas State aid to individual undertakings in difficulties is usually assessed under Article 87 (3)(c) of the EC Treaty and the Community Guidelines on State aid for rescuing and restructuring firms in difficulty, the systemic relevance of a financial institution and the impact of such an institution's failure on the economy, has been reflected by the preference for Article 87(3)(b) EC Treaty and Article 107(3)(b) TFEU.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.asers.eu/journals/jarle/jarle-issues.html
Download Restriction: no

Bibliographic Info

Article provided by ASERS Publishing in its journal Journal of Advanced Research in Law and Economics.

Volume (Year): I (2010)
Issue (Month): 2 (December)
Pages: 137 - 157

as in new window
Handle: RePEc:srs:jarle1:5:v:1:y:2010:i:2:p:137-157

Contact details of provider:
Web page: http://www.asers.eu/journals/jarle.html

Related research

Keywords: rescue aids; liquidity; banking communication; Systemically Relevant Financial Institutions; guarantees; recapitalization; financial crisis.;

Other versions of this item:

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Ojo, Marianne & Rodríguez-Miguez, Jose, 2010. "Juridical and financial considerations on the public re capitalisation and rescue of financial institutions during periods of financial crises (Part I)," MPRA Paper 24344, University Library of Munich, Germany, revised 10 Aug 2010.
  2. Ojo, Marianne & Rodriguez-Miguez, Jose, 2010. "Juridical and financial considerations on the public re capitalisation and rescue of financial institutions during periods of financial crises," MPRA Paper 25860, University Library of Munich, Germany, revised 12 Oct 2010.
  3. Ojo, Marianne, 2010. "The role of central banks and competition policies in the rescue and recapitalisation of financial institutions during (and in the aftermath of) the Financial Crisis," MPRA Paper 23651, University Library of Munich, Germany.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:srs:jarle1:5:v:1:y:2010:i:2:p:137-157. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Madalina Constantinescu) The email address of this maintainer does not seem to be valid anymore. Please ask Madalina Constantinescu to update the entry or send us the correct address.

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.