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The purpose of this article is to discuss the long‐term impact of the current financial and economic crisis on competition in the European Union (EU) banking sector.

The article first discusses the long term role of competition in the banking sector, commenting on policy developments prior to the crisis. Then the impact of the crisis is discussed focusing on two main areas of policy state: aids and bank regulation and supervision. The article culminates with the conclusions.

The main findings about state aids are that the efforts of the Commission to ensure that aided companies would not use the government support to distort competition seem to be working. However, given that the full impact on competition of these aids may take years to be felt, the Commission should be prepared to take action where necessary to ensure that competition will be protected. The provision of state aids could not have been avoided due to the grave systemic risks associated with bank failures. In respect of regulation and supervision, the article concluded that there is a lot of work to be done in this area to ensure that mistakes that led to the crisis will not be repeated but also that there is need for the Commission to ensure that the reforms to the regulatory and supervisory architecture do not occur at the expense of competition.

The article contains proposals about policy adjustments, thus contributing to the ongoing debate about the role of competition policy in the efforts to address the impact of the crisis.

The purpose of this paper is to discuss the long‐term impact of the recent financial crisis on European Union (EU) competition policy.

The paper, first, discusses the implications for competition from the measures adopted by national governments to address the recent financial crisis. Then, policy responses at EU level are presented and discussed. The paper culminates with a discussion of the future challenges.

The measures adopted by national governments to address the impact of the crisis on the financial sector and the broader economy, whilst necessary to stabilise the markets and pull the economies out of the recession, have potential adverse effects on competition inter alia by maintaining inefficient companies in the markets and delaying necessary market restructuring. The EU authorities have worked to facilitate the national efforts to address the crisis by adding flexibility to existing EU competition rules but they have declared that distortions of competition should be kept to a minimum. Nevertheless, despite these efforts, the current economic and political environment raises a number of challenges to competition policy which will have to be dealt with in 2010 and the years to come.

The paper contains a critical analysis of the impact on competition policy of the recent financial crisis and puts forward proposals for addressing these challenges. It contributes to the debate between economists and policy‐makers on the role impact of the financial crisis on competition policy.