Challenges for Competition Law arising from Financial Stability

Project Start:01/2016
Researchers:Pedro Magalhães Batista, Iwona Matylda Grandjean, Brigitte Haar, Casimiro Antonio Nigro, Katharina Pistor
Category: Law and Finance
Funded by:LOEWE

We aim to demonstrate how financial regulation may create spillovers jeopardizing the model of a fair and effective competition underlying the existing legal framework in the European Union. The legal analysis aims to capture the empirical findings on the basis of competition rules and, at the same time have well-reasoned information about the real effects of potentially anticompetitive lending behavior. Ultimately, this should show the interaction of seemingly quite diverse types of regulatory design, i.e. regulation targeted towards systemic risk and rules aiming for a competitive market structure.

This interaction could become particularly clear, when looking more closely at banks’ lending behavior encouraged by Basel II regulation, which may have to be qualified as anticompetitive under competition rules. The first question that arises in this context is the question about banks’ responsibility. Since Pillar 1 under Basel II lets the banks choose the way to calculate the required capital, these regulations may arguably not seem to preclude independent entrepreneurial action. After having defined a proper market, we can then look at the data on large banks possibly cream-skimming low-risk borrowers as to whether and how to qualify it as abusive pricing under Art. 102 TFEU. If cream-skimming by large banks is confirmed, further specification will be needed on the competitive situation in the questionable market segment for low risk borrowers and on how credit market outcomes are affected (project 1). This may serve as a point of departure for the analysis under the highly differentiated framework to identify predatory pricing as provided for e.g. in the EU Commission’s Guidance Paper on its Enforcement Priorities in applying EC Treaty rules on abuse of a dominant market position and in the long-standing case law recently pronounced by the ECJ in its Post Danmark-case (Mestmäcker and Schweitzer 2014, Wurmnest 2012).

Related Published Papers

Author/sTitleYearProgram AreaKeywords
Brigitte HaarToo-big-to-fail im Spannungsfeld von Wettbewerb und Regulierung
Festschrift für Theodor Baums zum siebzigsten Geburtstag (Mohr Siebeck)
2017 Law and Finance