Abstract

Financial stability and competition may collide in crisis times especially when public support is granted to avoid the immediate exit of banks or when mergers may occur in order to address also the concerns of future difficulties of the banks thus further increasing their size. The importance of State Aid decisions on "ad hoc" interventions is twofold. On one side by imposing the divestures of assets they can affect the banks' features and the dynamics of the European banking system, thus reducing the size of the supported banks and changing their business model and giving the opportunity to enter new markets or strengthen their position to those who are willing to and can do so. On the other, they provide suggestions to the regulatory debate now going on the size of the banks. Nowadays stability is key in the regulation reform. However, the risk that downsizing and refocusing on market and core activities bring along the retrenchment within national borders and the fragmentation of the Single Market requires more competition and not less, especially if recovery is sought.