1 PRELIMINARY Regulation and Competition Policy in the Banking Sector*

The banking sector has long been exempted by the application of competition policy because of the potential trade-off between competition and stability. In this paper we review the academic literature on this issue, and we describe the design of competition policy in Europe and the application of competition policy at the European level in the last two decades. The analysis highlights that competition policy is now taken seriously in the financial sector. The European Commission has pursued cartels, abuses, mergers and state aids in the financial sectors, and it has taken some landmark decisions. Still, much remains to be done in terms of academic research and on the role that the European Commission can play also in fostering financial integration in Europe