Home | Sectors | Financial Services | Related Publications

Financial Services - Related Publications

19/01/2018 - The Economic Impact of Debt Advice

  Research by Europe Economics - undertaken for the UK's Money Advice Service - shows that debt advice can make a major difference in improving the lives of heavily indebted individuals and families. Debt advice reduces the financial burden - but beyond this we found robust, measurable effects in improving mental health and well-being, enhancing work productivity and reducing the likelihood of re-entry into a cycle of problem debt. Overall, we estimated the measurable social benefits from debt advice to be £0.3-£0.6 billion annually across the UK. Further details on our approach and our main findings can be found in our report on "The economic impact of debt advice". This work was led by Ross Dawkins. Read this article here

17/01/2018 - Summary Findings of ATM Impact Study

 The UK’s Payment Systems Regulator (PSR) has today published our Summary Findings on the current viability of the UK free-to-use ATM network and the impacts of potential future reductions in interchange fees and cash withdrawal volumes on the viability of the network moving forward. Our Summary Findings can be accessed from the PSR webpage on ‘The UK’s ATM Network’.

31/03/2017 - Briefing Note: A simple illustration of certain benefits of “short-selling”

This note provides a simple description of short-selling practices together with an illustration of the potential benefits it can bring to investors.

23/02/2017 - Report: Ex ante Impact Assessment of IFRS 16

The European Financial Reporting Advisory Group commissioned Europe Economics to conduct an ex ante impact assessment on the potential impact of IFRS 16 Leases. We analysed the potential impact on the behaviour of lessee companies listed on European Regulated Markets, investors, the leasing industry and other affected stakeholders, and also estimated costs and benefits of IFRS 16. Our work was led by Ross Dawkins. EFRAG's Draft Endorsement Advice references our study, with further details of EFRAG’s ongoing work here.

22/12/2016 - Briefing Paper: FCA’s Market Study and Brexit: Next Challenges for the UK Asset Management Industry

The UK asset management industry has grown significantly over the past decade, remaining positioned as the largest in Europe by far and second only to the US globally. However, additional challenges and sources of uncertainty are forthcoming: the impact of the UK’s decision to leave the European Union and the publication of the interim findings of the Financial Conduct Authority’s (FCA) asset management market study. In this briefing note we describe their potential effects and provide an overview of the main facts and figures characterising the industry.

22/11/2016 - The Economic Impact of Improved Financial Capability

Europe Economics’ study analysing the economic impact of improving financial capability has been published by the Money Advice Service. The Press Release can be read here. Our work involved the construction of model which combined survey data on 3500 individuals with insights from economics and behavioural finance to estimate the consumer impact of improving financial capability across the UK. Our study also analyses the impact on the supply-side (i.e. the financial services industry). Our model is expected to be used in future policy-making by the MAS in helping to set the UK's financial capability strategy. This work was led by Ross Dawkins, Principal at Europe Economics

28/06/2016 - Briefing note: Interest free microfinance and impact on poverty alleviation

Poverty alleviation and sustainable development are amongst the main concerns of the developing world. In the most recent study conducted in 2012, 12.7 percent of the world's population still lived below the poverty line (at or below $1.90 a day). In the light of this, one of our Analysts, Summayah Leghari, has written a note on the role of interest free microfinance in poverty alleviation, with a particular focus on a unique micro finance model of voluntary contributions and zero interest, practiced in Pakistan.

09/06/2016 - Study on the State of the Credit Rating Market

Europe Economics’ study on the state of the credit rating market has been published by DG FISMA. The report describes the current extent of competition and of competitiveness in the different segments of the credit rating market (such as sovereigns, corporate and covered bonds, structured finance instruments). We also assessed the current and anticipated impact of the Regulation on credit rating agencies (CRAR3) on competition. We identified and assessed the feasibility of potential additional measures to further promote competition and quality in credit rating. We worked with three academic collaborators: Dr Dion Bongaerts, Dr Nelson Camanho and Dr Sandra Einig. The project was led by Ross Dawkins.

15/03/2016 - The Uses (and Abuses) of Modelling Adjustments

Our report on “The uses (and abuses) of Modelling Adjustments in Internal-Ratings Based Models” has been published by the Association for Financial Markets in Europe.

21/12/2015 - Data Gathering and Cost Analysis on Draft Technical Standards Relating to the Market Abuse Regulation

Europe Economics’ final report on the Market Abuse Regulation (MAR) has been published. This study analyses the cost impacts expected to arise from the implementation of the European Securities and Markets Authority’s Technical Standards related to the MAR. Our work covered topics such as Market Soundings, Insider Lists and Suspicious Transaction and Order Reporting.  

06/04/2015 - Money Market Funds - A research paper for the European Parliament

Europe Economics have written a research paper for the European Parliament's Committee on Economic and Monetary Affairs on the impact of proposed EU regulations on Money Market Funds. You can read our full report by clicking on the link below and read an executive summary written by the European Parliament by clicking here.

26/03/2015 - Measuring the Benefits to UK Consumers from the Creation of the European Single Market: Feasibility Study and Test Case - A report for BIS

Europe Economics have written a report for the Department for Business, Innovation & Skills considering the impact of the single market on prices, quality and the range of goods available. It develops an international benchmarking approach to measure the effect of the single market and then tests this method on the car and home insurance sectors.

03/02/2015 - Baseline report on solutions for the posting of non-cash collateral to central counterparties by pension scheme arrangements - A report for DG Market

Europe Economics developed a study (executive summary only) for DG MARKT (now DG FISMA) on the potential impact of pension funds having to post cash collateral in clearing their OTC derivatives. This work models the effect of ending the current temporary exemption to the application of some of EMIR’s requirements. We worked with Bourse Consult on this project, which also considered the feasibility of various alternative solutions to posting cash, and the ability of the market to deliver these. Our work was an input into the European Commission's own report recommending a two year extension of the exemption. EU Commissioner for Financial Stability, Financial Services and Capital Markets Union, Jonathan Hill said: “Today's report sets out a number of potential ways to facilitate central clearing for pension funds. But none of them is straightforward and it is sensible to take more time to develop a solution which is proportionate.”  

09/01/2015 - How EU Wholesale Financial Regulation Differs from what the UK would Choose for Itself - A report for Business for Britain

This Europe Economics report for Business for Britain focuses on EU regulation and tax measures affecting wholesale financial services — of vital interest to the City — and considers which, of such regulation introduced at EU level, the UK would have introduced itself, acting alone, and which it would not.

16/12/2014 - Retail Distribution Review: Post Implementation Review - A report for the Financial Conduct Authority

Europe Economics was commissioned by the FCA to undertake the post-implementation review of its Retail Distribution Review (RDR) of the financial advice market. Our report was published on 16th December 2014. We found early indications that the RDR is working as intended, although we also identified issues where further attention may be required.  Further details are available here and our report can be downloaded directly here.

21/09/2014 - The economic impact of interchange fee regulation - Slovenia

The economic impact of interchange fee regulation in Slovenia; a report for Mastercard. Andrew Lilico, Executive Director of Europe Economics and author of the report, said: “The impact of similar legislation around the world provides a clear warning of the need for further scrutiny of the proposed regulations.  The experience in Spain, Australia and the United States has been that consumers have so far paid more in banking fees, but not seen a reduction in prices at the shops. Large retailers appear to gain the most, while small businesses might not enjoy the same reductions in fees, but could pay more for their banking services.     Proposals to regulate commercial cards and separate schemes and card processing are likely to be particularly disruptive. The consequences of legislative interference in interchange fee rates require much more careful examination than they have received up to now. The justification for action is not rigorous enough for an intervention with so many poorly understood risks.”

21/09/2014 - The economic impact of interchange fee regulation - Slovakia

The economic impact of interchange fee regulation in Slovakia; a report for Mastercard. Andrew Lilico, Executive Director of Europe Economics and author of the report, said: “The impact of similar legislation around the world provides a clear warning of the need for further scrutiny of the proposed regulations.  The experience in Spain, Australia and the United States has been that consumers have so far paid more in banking fees, but not seen a reduction in prices at the shops. Large retailers appear to gain the most, while small businesses might not enjoy the same reductions in fees, but could pay more for their banking services.     Proposals to regulate commercial cards and separate schemes and card processing are likely to be particularly disruptive. The consequences of legislative interference in interchange fee rates require much more careful examination than they have received up to now. The justification for action is not rigorous enough for an intervention with so many poorly understood risks.”

21/09/2014 - The economic impact of interchange fee regulation - Romania

The economic impact of interchange fee regulation in Romania; a report for Mastercard. Andrew Lilico, Executive Director of Europe Economics and author of the report, said: “The impact of similar legislation around the world provides a clear warning of the need for further scrutiny of the proposed regulations.  The experience in Spain, Australia and the United States has been that consumers have so far paid more in banking fees, but not seen a reduction in prices at the shops. Large retailers appear to gain the most, while small businesses might not enjoy the same reductions in fees, but could pay more for their banking services.     Proposals to regulate commercial cards and separate schemes and card processing are likely to be particularly disruptive. The consequences of legislative interference in interchange fee rates require much more careful examination than they have received up to now. The justification for action is not rigorous enough for an intervention with so many poorly understood risks.”

21/09/2014 - The economic impact of interchange fee regulation - Poland

The economic impact of interchange fee regulation in Poland; a report for Mastercard. Andrew Lilico, Executive Director of Europe Economics and author of the report, said: “The impact of similar legislation around the world provides a clear warning of the need for further scrutiny of the proposed regulations. The experience in Spain, Australia and the United States has been that consumers have so far paid more in banking fees, but not seen a reduction in prices at the shops. Large retailers appear to gain the most, while small businesses might not enjoy the same reductions in fees, but could pay more for their banking services.     Proposals to regulate commercial cards and separate schemes and card processing are likely to be particularly disruptive. The consequences of legislative interference in interchange fee rates require much more careful examination than they have received up to now. The justification for action is not rigorous enough for an intervention with so many poorly understood risks.”

21/09/2014 - The economic impact of interchange fee regulation - Lithuania

The economic impact of interchange fee regulation in Lithuania; a report for Mastercard. Andrew Lilico, Executive Director of Europe Economics and author of the report, said: “The impact of similar legislation around the world provides a clear warning of the need for further scrutiny of the proposed regulations.  The experience in Spain, Australia and the United States has been that consumers have so far paid more in banking fees, but not seen a reduction in prices at the shops. Large retailers appear to gain the most, while small businesses might not enjoy the same reductions in fees, but could pay more for their banking services.     Proposals to regulate commercial cards and separate schemes and card processing are likely to be particularly disruptive. The consequences of legislative interference in interchange fee rates require much more careful examination than they have received up to now. The justification for action is not rigorous enough for an intervention with so many poorly understood risks.”

21/09/2014 - The economic impact of interchange fee regulation - Italy

The economic impact of interchange fee regulation in Italy; a report for Mastercard. Andrew Lilico, Executive Director of Europe Economics and author of the report, said: “The impact of similar legislation around the world provides a clear warning of the need for further scrutiny of the proposed regulations.  The experience in Spain, Australia and the United States has been that consumers have so far paid more in banking fees, but not seen a reduction in prices at the shops. Large retailers appear to gain the most, while small businesses might not enjoy the same reductions in fees, but could pay more for their banking services.     Proposals to regulate commercial cards and separate schemes and card processing are likely to be particularly disruptive. The consequences of legislative interference in interchange fee rates require much more careful examination than they have received up to now. The justification for action is not rigorous enough for an intervention with so many poorly understood risks.”

21/09/2014 - The economic impact of interchange fee regulation - Germany

The economic impact of interchange fee regulation in Germany; a report for Mastercard. Andrew Lilico, Executive Director of Europe Economics and author of the report, said: “The impact of similar legislation around the world provides a clear warning of the need for further scrutiny of the proposed regulations.  The experience in Spain, Australia and the United States has been that consumers have so far paid more in banking fees, but not seen a reduction in prices at the shops. Large retailers appear to gain the most, while small businesses might not enjoy the same reductions in fees, but could pay more for their banking services.     Proposals to regulate commercial cards and separate schemes and card processing are likely to be particularly disruptive. The consequences of legislative interference in interchange fee rates require much more careful examination than they have received up to now. The justification for action is not rigorous enough for an intervention with so many poorly understood risks.”

21/09/2014 - The economic impact of interchange fee regulation - France

The economic impact of interchange fee regulation in France; a report for Mastercard. Andrew Lilico, Executive Director of Europe Economics and author of the report, said: “The impact of similar legislation around the world provides a clear warning of the need for further scrutiny of the proposed regulations.  The experience in Spain, Australia and the United States has been that consumers have so far paid more in banking fees, but not seen a reduction in prices at the shops. Large retailers appear to gain the most, while small businesses might not enjoy the same reductions in fees, but could pay more for their banking services.     Proposals to regulate commercial cards and separate schemes and card processing are likely to be particularly disruptive. The consequences of legislative interference in interchange fee rates require much more careful examination than they have received up to now. The justification for action is not rigorous enough for an intervention with so many poorly understood risks.”

21/09/2014 - The economic impact of interchange fee regulation - Austria

The economic impact of interchange fee regulation in Austria; a report for Mastercard. Andrew Lilico, Executive Director of Europe Economics and author of the report, said: “The impact of similar legislation around the world provides a clear warning of the need for further scrutiny of the proposed regulations.  The experience in Spain, Australia and the United States has been that consumers have so far paid more in banking fees, but not seen a reduction in prices at the shops. Large retailers appear to gain the most, while small businesses might not enjoy the same reductions in fees, but could pay more for their banking services.   Proposals to regulate commercial cards and separate schemes and card processing are likely to be particularly disruptive. The consequences of legislative interference in interchange fee rates require much more careful examination than they have received up to now. The justification for action is not rigorous enough for an intervention with so many poorly understood risks.”

21/09/2014 - The economic impact of interchange fee regulation - UK

The economic impact of interchange fee regulation in the UK; a report for Mastercard. Andrew Lilico, Executive Director of Europe Economics and author of the report, said: “The impact of similar legislation around the world provides a clear warning of the need for further scrutiny of the proposed regulations.  The experience in Spain, Australia and the United States has been that consumers have so far paid more in banking fees, but not seen a reduction in prices at the shops. Large retailers appear to gain the most, while small businesses might not enjoy the same reductions in fees, but could pay more for their banking services.   Proposals to regulate commercial cards and separate schemes and card processing are likely to be particularly disruptive. The consequences of legislative interference in interchange fee rates require much more careful examination than they have received up to now. The justification for action is not rigorous enough for an intervention with so many poorly understood risks.”

31/07/2014 - Cost Benefit Analysis of the New Regime for Individual Accountability and Remuneration - A report for the Financial Conduct Authority

Europe Economics have written a report for the Financial Conduct Authority on an evaluation of the costs and benefits of a change to the accountability regulations in the financial services sector and amendments to the rules on remuneration. This included the development of a cost of compliance model and estimation of the indirect costs and benefits.

22/06/2014 - EU Financial Regulation - A report for Business for Britain

This report was commissioned from Europe Economics by Business for Britain.  Chancellor George Osborne recently stated: “If we cannot protect the collective interests of non-eurozone member states then they will have to choose between joining the euro, which the UK will not do, or leaving the EU.”  This report considers whether the concern Osborne raises is applicable to EU-level setting of finance and financial services regulation and, if so, what reforms might address it. We argue that prior to the Eurozone crisis, the general thrust of EU financial services measures reflected the UK’s traditions of liberalisation, competition and the encouragement of trade.  This was particularly so in the ways EU-level financial regulation affected other Member States much more than it affected the UK, because EU rules mirrored pre-existing UK rules.  We illustrate this with the examples of the Markets in Financial Instruments Directive and the Takeover Directive.  Furthermore, there was a traditional reluctance to over-rule the EU on financial services regulation as the UK was the centre of the largest finance / financial services industry in Europe, whilst the EU in turn offered UK firms large and growing financial services export opportunities. Since the financial crisis of 2008 and especially since the Eurozone crisis of 2010 onwards, the UK’s influence on EU-level financial services regulation has declined markedly.  In many parts of the EU the financial crisis and thus the Eurozone crisis are blamed upon “light touch” regulation failing the discipline the activities of “Anglo-Saxon” financiers in the US and UK.  For many in the EU, the UK’s pre-crisis influence upon financial regulation is seen as malign. Both in the UK and in the rest of the EU, there has been a significant change in the spirit and thrust of regulation since 2008.  But whereas in the UK the change has been towards increasing quality of supervision and strengthening market incentives, at EU level the focus has been much more upon extending scope of regulation, curbing specific behaviours, and protecting the integrity of the Eurozone.  The Eurozone is now set to have the collective weight in qualified majority voting to impose any financial regulation it chooses upon the UK, and its significantly divergent interests mean it may do so. This considerable loss of UK influence is exemplified by the UK being reduced to pursuing four legal cases in the financial services regulation area at the European Court of Justice — at least three of which it seems likely to lose.  At the same time, opportunities for financial services exports outside the EU are now growing (and expected for the foreseeable future to grow) much more rapidly than inside the EU, increasing the cost to UK exporters of an EU focus, whilst the main threats of regulatory arbitrage to the UK are less and less from other European countries and more and more from outside the EU. We consider potential reforms to EU-level setting of financial services regulation, including the extension of “double majority voting” (whereby changes to Single Market rules would require a majority of both Eurozone and non-Eurozone members to pass) and specific undertakings for forbearance from other EU Member States in respect of financial and financial services regulation.  We argue that although such measures may offer some protection in the very short term (up to around 2018) they are unlikely to be sustainable over the longer term because almost all current non-Eurozone members of the EU intend to join the euro by 2020, meaning “double majority voting” would become very close to a UK veto on any new financial regulation — and thus unacceptable to Eurozone members. To make such reforms to voting procedures viable over the longer term would require a large influx of new EU members that would not be required or expected to join the euro for many decades.  Given the change to the nature of the EU that would result and the pool of countries from which such an influx would have to come, the challenges of achieving such a large expansion would be very significant indeed. These are complex issues, and further research would be warranted in a number of areas.  But we believe the central message is clear: For EU-level setting of finance/financial services to be in the UK’s interests long-term, as well as amendments to a number of existing EU regulations, there would also need to be a set of new principles for how EU financial regulations are agreed.  Even then that would be unlikely to be viable unless the long-term membership of the Eurozone and non-Eurozone EU are much closer to balance than is currently planned.  

04/12/2013 - European Commission Proposals for Interchange Fees - Report for Mastercard

MasterCard commissioned Europe Economics to undertake a critique of the European Commission’s impact assessment of policy options related to the regulation of interchange fees paid by acquiring banks to card issuing banks.  The report also considers the impact of the European Commission’s proposals in the UK.

02/10/2013 - Cost-benefit analysis of the FCA's Detailed Proposals for a new Consumer Credit Regime

The Financial Conduct Authority published its detailed proposals for the new Consumer Credit Regime.  The FCA intends the proposed regime to provide stronger protection and improved outcomes for consumers. Europe Economics analysed the costs, benefits and behavioural changes anticipated to result from the implementation of the new regime.  This follows on from our previous work - published on 6th March earlier this year - assessing the FCA's initial proposals for the new regime.

02/07/2013 - Europe Economics has written a report for Mastercard on the economic impact of interchange fee regulation in the UK

This report was commissioned by MasterCard from Europe Economics, and was produced in conjunction with Professor Sheri Markose of the University of Essex. The study assesses the impacts of introducing interchange fee (IF) regulation charged by card issuers to acquirers in the UK.

05/12/2011 - Continental Shift: Safeguarding the UK’s financial trade in a changing Europe

Europe Economics provided analysis for the Open Europe report on safeguarding the UK's financial trade in Europe.  Open Europe argues that the Government must seek to safeguard the economic benefits to Europe and the UK offered by the financial services sector. We contributed to the quantification of the impact of financial centres and financial development on growth.

05/12/2011 - Costs and Benefits to the UK of EU Setting of Financial Services Regulation.

In a paper for Open Europe, Europe Economics considered the pros and cons of the European Union setting financial services regulation to apply to the UK.  It is argued that some of the most material reasons why EU setting of financial regulation might have been to the net benefit of the UK, are unlikely to apply over the next few years.

27/07/2011 - The Value of Europe's International Financial Centres to the EU Economy

The City of London has published a report by Europe Economics on the value of Europe's international financial centres to the EU economy.  The report demonstrates that the activities of international financial centres are not socially useless (or even socially destructive) and that the financial sector innovations are generally not destructive. International financial centres produce and contribute towards a whole host of socially useful functions that households, businesses and governments benefit from.

04/10/2010 - Markets and Households on Low Incomes

Europe Economics recently completed a study for The Office of Fair Trading into ways in which low income households might be disadvantaged in particular markets.  This work, carried out in collaboration with the New Policy Institute, focused on food, energy, financial services, transport and the internet.  We identified demand and supply side factors which had a differential effect on people in the lowest income group. Access to certain products, such as the internet and bank accounts, had an important ‘enabling’ effect by improving access to products in other markets.

31/05/2010 - Review of High Cost Consumer Credit - International Research: Case Studies on Ireland, Germany and the United States

The OFT has published emerging evidence from its review of high-cost credit. This includes a review of international approaches to provision of high cost credit carried out by Europe Economics. This review shows significant differences between the countries considered.

30/04/2010 - The Future of Banking Regulation

Assessment of the impacts of the Basel Committee proposals of December 2009 – contribution to the City of London’s consultation response.

31/03/2010 - Household Indebtedness in the EU

Europe Economics' analysis, for the European Parliament CRIS Committee, of household indebtedness across the EU.

04/02/2010 - Cost of Capital for NATS (En Route) plc for CP3

Europe Economics was commissioned by the CAA to advise on the appropriate cost of capital that NERL is allowed to charge over the third price control period CP3.

29/01/2010 - Regulating Finance for NATS CP3

Europe Economics advised the CAA on regulating finance issues in relation to NATS, in particular the concern of the CAA that bondholders may not view as credible any stated commitment by the CAA not to “bail out” NATS in the event of financial distress as credible.

01/12/2009 - Ex-ante Evaluation of the Proposed Alternative Investment Managers Directive

This Short Impact Assessment by Europe Economics builds on the Impact Assessment carried out by the European Commission to provide a quantitative assessment of the costs and benefits associated with the so-called “AIFM Directive”. It considers the rationale for intervention in the AIFM sector, as well as alternative approaches for regulation

26/11/2009 - Retail Insurance Market Study

Europe Economics' 'Retail Insurance Market Study' for DG Internal Market and Services of the European Commission has just been published. This study examines the market structure, the scale of cross-border activity, the evolution in premiums and profitability and innovation in insurance pricing across the whole of the EU27. It is focused on motor and home insurance and incorporates comparisons to either the USA or to selected US States. The study includes the results of an extensive mystery shopping exercise and ground-breaking analysis of the size and direction of cross-border activity in these markets.

01/03/2009 - Themes and trends in Regulatory Reform

Europe Economics was invited in February 2009 to express its views on regulation and regulators to the House of Commons Regulatory Reform Committee in connection with its inquiry into "Themes and Trends in Regulatory Reform". The Committee has now published its report, which may be viewed on-line. Click to access the House of Commons Regulatory Reform Committee website. To view the submission of Europe Economics click on 'WRITTEN EVIDENCE - VOLUME II (HC 329-II)' at the foot of the page, then click on 'Memorandum submitted by Europe Economics'.

15/01/2009 - Study on Credit Intermediaries in the Internal Market

A ground-breaking review of the role of credit intermediaries in the internal market and any possible consumer detriments arising from that role.  This included the comparative study of the activities of mortgage intermediaries across the EU27.

05/01/2009 - Study on the Cost of Compliance with Selected FSAP Measures

Europe Economics' report for the FSAP Evaluation has now been published. Our work was based on structured interviews with a diverse mix of European financial services companies to obtain estimates of the cost of compliance with the selected directives (MiFID, CRD, 3AMLD, Transparency Directive, Financial Conglomerates Directive and Prospectus Directive). The study was completed in January 2009.  

03/03/2008 - Consideration of a Discretionary Recording Requirement

Report for Financial Services Authority (Annex 3 of the FSA document)