A study commissioned and released by the European Green Party shows that Europe’s largest banks are recipients of “implicit subsidies” to the tone of 234 billion in 2012, the equivalent of more than 10% of the European GDP of that year.
Banks that are deemed “too big to fail” obtained subsidies from Member states since governments are expected to rescue struggling credit institutions with tax payers’ money. No contractual agreements exist specifying the amounts or conditions related to implicit government support.
This constitutes a major policy concern as it creates distortion in financial markets by, for instance, providing a competitive advantage for big receiving banks in comparison to smaller banks without implicit subsidies.
Please read the study here.