NCCR/TILEC workshop on financial services

The Swiss National Centre of Competence in Research (NCCR, individual projects 8 and 10) and TILEC have jointly organized a workshop on Challenges and New Directions in the Regulation of Financial Services. The workshop will take place on June 25-26, 2009 at the World Trade Institute, Berne, Switzerland. Amidst the financial crisis, this interdisciplinary workshop gathers renowned economists and lawyers and aims to tackle several aspects of financial services regulation relating to financial innovation, transparency, trade policy considerations as well as some of the newly identified issues in financial regulation. Speakers for this two-day workshop include Ernst Baltensberger (University of Bern), Thorsten Beck (Tilburg University), Hans Degryse (TILEC), Kern Alexander (University of Cambridge), Eva Huepkes (Financial Market Supervisory Authority Switzerland) and Maria Teresa Fabregas-Fernandez (European Commission). Due to organisational reasons, participation in this workshop is subject to registration. Therefore, if you want to participate, please register with Ms Gaby Hofer by June 2.

Did the liberalization of gas markets deliver the intended results?

Christian van Hirschhausen, Technische Universität Dresden Fakultät Wirtschaftswissenschaften Lehrstuhl für Energiewirtschaft
The process of liberalizing gas markets started about a decade ago in continental Europe, even earlier in the U.K. and the US. Do we have reasons to be satisfied with the outcome? On April 23 2009, an Energy Economics Policy Seminar, jointly organized by TILEC, the Netherlands Bureau for Economic Policy Analysis (CPB), the Dutch Ministry of Economic Affairs (EZ) and the Netherlands Competition Authority (NMa), took place in the Hague. The event, which aimed at assessing the impact of liberalization on prices and investments, was extremely well-attended. Christoph Riechmann (Frontier Economics) argued that prices at the wholesale and retail level continued moving in line with oil prices in the medium- and long-run while the short-run gas price is determined to a larger extent by parameters which are specific for the gas market. Christian van Hirschhausen (DIW, Berlin) argued that the conventional opposition between liberalization, with its focus on improving static efficiency, and investment incentives was over-emphasized in the gas market, where investments in regazification and pipeline infrastructure were forthcoming both in the US and in Europe (although some specific, publicly-sponsored investments might be needed in Eastern Europe).

The consumer: a source of regulatory legitimacy?

Economic regulation by independent regulatory authorities is traditionally justified in a legal sense by theories based on delegation, (partial) ministerial responsibility and judicial review. More recently, regulatory contracts and stakeholder representation provide a similar function. All these models focus either on the relationship between the regulator and the central authority, or on the parties subject to economic regulation, but do not focus on the ultimate objective of regulation: consumer benefits. Can the consumer, or the general consumer interest, act as an additional source of regulatory legitimacy? Healthcare regulation in the Netherlands provides a good context for this question. The Dutch Healthcare Market Regulation Act (Wmg) creates the possibility of a new starting point for legitimacy, because it not only introduces the general consumer interest as a legal concept, but as the priority objective of regulation. In a recent TILEC discussion paper, Wolf Sauter (TILEC, NZA) investigates how to interpret this new concept, operationalised in three variables: quality, affordability and accessibility. His analysis draws on the economic approach to regulation (market failure, market power, bounded rationality), and whether it can provide a non-trivial source of legitimacy, based on the results achieved in serving the statutory constituency of the regulator: the consumer.

Financial contagion

The recent financial crisis, while having its roots in the US, spread globally in a very short span of time. Banks' interdependence played an obvious role but not much is known about world financial contagion channels. In a recent TILEC discussion paper, TILEC members Hans Degryse and María Fabiana Penas and co-author Muhammad Ather Elahi (Tilburg University) examine cross-border contagion risk over the period 1999-2006. To that purpose they use aggregate cross-border exposures of banks in seventeen countries. They find that a shock which affects the liabilities of one country may undermine the stability of the entire financial system. For instance, a shock wiping out 25% of US cross-border liabilities against non-US banks could lead to bank contagion eroding at least 94% of the recipient countries&ampacute banking assets. They also find that since 2006 a shock to Eastern Europe, Turkey and Russia affects most countries. Simulations also reveal that the speed of contagion has increased in recent years resulting in a higher number of directly exposed banking systems. Finally, they find that contagion is more widespread in geographical proximities. Ironically, the US is the only country immune to cross-border shocks stemming from other countries!

Successful CLEEN meeting in Tilburg

On May 14 and 15, 2009, TILEC hosted the yearly gathering of the Competition Law and Economics European Network (CLEEN). This network, which was created in 2007, associates research centers with a profile similar to TILEC&middots one in order to foster exchanges of ideas, experiences and researchers. Previous meetings had taken place in Bonn and Norwich. This time, 35 researchers from the Amsterdam Center for Law and Economics (ACLE) at the University of Amsterdam, the Center for Competition Policy (CCP) at the University of East Anglia, the Robert Schuman Centre for Advanced Studies (RSCAS) at the European University Institute in Florence, the Max-Planck Institute for Research on Collective goods in Bonn, and TILEC came to Tilburg to present and discuss about 25 papers on competition or regulation issues. The keynote speeches were delivered by J. Gregory Sidak (Criterion Economics) and Edward Droste (CRA), who presented their views on the present and future of merger guidelines in the US and in Europe. The meeting, organized by Cedric Argenton and Rochelle van Rooij at TILEC, was well-received and participants look forward to the collaboration opportunities that may ensue.