Yesterday, in a speech at the International Banking Conference of British Bankers Association in London, E.U. Competition Commissioner Neelie Kroes stated that, while government intervention efforts had alleviated the crisis, the focus should now be directed towards helping “restore long-term viability to the system,” since European governments are “potential spending 16.5% of GDP on bailouts.” She emphasized that the European Single Market has been affected by large distortions of the various markets involved, with 70 banking state aid decisions across Europe, making “the need for competitive market structures … stronger than ever.”
Specifically focusing on the U.K., Commissioner Kroes indicated that the U.K. financial sector has received £1.26 trillion of government support, has accumulated losses of £250 billion since the collapse of Lehman Brothers and maintains a funding gap of £800 billion between loans and deposits. Furthermore, the massive aid received by certain U.K. banks, notably Lloyds and RBS, have allowed these banks to “remain leaders in markets which are concentrated,” even though they are too big to fail, too big to supervise, too complex to understand and highly dangerous to the European Single Market, according to Commissioner Kroes.
Commissioner Kroes stated that “restructuring must follow rescue aid,” such that banks have a “sustainable business without relying explicitly or implicitly on another bailout.” She indicated that she would be working with the U.K. government to ensure that U.K. banks are viable without state support, that banks not receiving aid are not disadvantaged as a result of aid to other banks and that banks have a business model that reduces systemic risk.