SKILLS & EXPERTISE

FINANCE

Financial markets are changing rapidly, driven by increasing complexity and interconnectedness. We can bring to bear a number of core capabilities appropriate to different players.

Thorough and well-informed economic analysis can help regulators design appropriate regulatory frameworks. Europe Economics assists in performing analyses of costs, benefits and market impacts of financial regulation proposals. The firm can help design reforms and regulatory strategies, and advises on technical issues connected with specific regulatory decisions.

Our team has a sound knowledge of the financial and economic literature and are capable of performing advanced reviews and studies that combine a rigorous analytical approach with a strong focus on the client’s needs.

The firm has advised bodies such as the European Commission’s DG Internal Market and the UK Financial Services Authority on a number of projects. This variously includes studies into:

• the incremental cost impact of complying with various legislative measures
• the likely impact on competition of possible statutory regulation of the mortgage and general insurance industries
• techniques for measuring the past performance of unit trusts and open-ended investment companies.

Competition work relating to the financial services sector includes a study for the Irish Competition Authority looking at competition in the non-life insurance sector, a study motivated by concerns about the rising cost of insurance premiums. The firm has also advised an exchange during a competition investigation in the UK.

The same skills underpinning our other work – well-rounded knowledge and the rigorous application of financial analysis - enable us to assist market participants with their lobbying efforts and during consultation processes. We can also help to resolve disputes between firms and authorities.

We have built up a considerable track record in providing cost of capital expertise developed through a number of projects, such as for the Civil Aviation Authority in its review of BAA). This core corporate finance skill can be applied more broadly, for instance in asset valuation.

Robust asset valuation is a function of the following:

• Detailed financial analysis to model the asset’s associated cash flows. This involves the identification of the drivers of the asset’s performance and the linkage of these to broader economic forces.
• The application of the appropriate discount factor to establish a net present value.
• Any option value present in the asset.
• A clear understanding of the best alternative use of the asset or its separable elements.

Other work includes papers on short selling and the functioning of markets under conditions of bounded rationality.