Competition Policy and "Too Big" Banks in the European Union and the United States. (March 2014)

• Record Type: Journal Article
• Authors: Foer, Albert A.; Resnikoff, Don Allen
• Is Part Of: Antitrust bulletin. Volume 59:Number 1(2014)
• Page Start: 9
• Page End: 30
• Publication Date: 2014-03
• Subjects: antitrust -- competition policy -- concentration -- consolidation -- financial services industry -- bank mergers; Antitrust law -- United States -- Periodicals; Restraint of trade -- United States -- Periodicals; 343.73072105
• DOI: 10.1177/0003603X1405900102
• Languages: English
• ISSNs: 0003-603X

Abstract

This article examines the role of antitrust and competition policy in regulation of large banks made fragile by the financial meltdowns of 2007–09. We compare crisis-related regulation in the European Union and the United States and find that in the European Union, competition policy experts played a key role in applying crisis-related financial regulation, but in the United States they did not. Consequentially, the European Union avoided making banks bigger as a side effect of making weak banks stronger. In the United States, bank consolidation was encouraged. We argue that in the United States, policies to preserve competition should be given a more significant role and made part of an on-going plan that will apply even in a time of crisis. At minimum, the Antitrust Division of the Justice Department should be promptly consulted by the prudential regulators of financial institutions on all matters likely to substantially affect the structure of the financial services industry, including market power issues.