| Abstract: |
As well as a consideration of why the lender of last resort facility should be
used for emergency situations and systemically relevant institutions in
particular, an interesting point which will be considered in this paper is the
comparison between the European Central Bank (ECB) Recommendation and its
application by the Commission in the Re capitalisation Communication,
specifically with its Annex, where the Commission explains how it determines
the price of equity (ordinary or common shares) - balancing the “real value”
with the “market value” within a crisis context. Whether the Commission and
Member States have applied this methodology in determining the price of equity
with respect to the capital of banks acquired by Member States, will also be
addressed. Such consideration could provide a vital key to determining the
real value of State Aid and the best possible price for which capital could be
sold. Given the scale of government intervention and State rescues which
occurred during the recent crisis – as well as the prominence accorded to
measures aimed at preventing and limiting distortions of competition, calls
have been made for competition authorities to take on more formidable roles in
designing and implementing exit strategies. In order to foster competition as
much as possible, it is proposed that ”governments should provide financial
institutions with incentives to prevent them from depending on government
support once the economy begins to recover.” |