Regulation Agenda Research Articles

The Thatcher government and (de)regulation: modularisation of individual personal pensions

PurposeThe (de)regulation agenda of the Conservative government, led by Margaret Thatcher, elected in 1979 is an important change point that has attracted only limited attention from management and historical research scholars. Thus, how (de)regulation in this era influenced the evolution of product design remains ripe for exploration. The purpose of this paper is to examine the UK individual personal pensions product market between the mid-1980s and mid-1990s to examine the relationship between (de)regulation – an industry-level factor – and its impact on architectural choices of product design – a product-level factor.Design/methodology/approachA retrospective, oral history research design with 31 senior managers in product development firms with first-hand experience of the change period was adopted.FindingsFindings indicate that the (de)regulation reforms and the context of the financialisation of product markets came to define how products were then designed, evolving product design from non-modular to near-modular, a trajectory that arguably continues until the present day.Originality/valueThe main contribution lies in examining the role of (de)regulation and financialisation as modularisation processes. The increasing modularisation of individual personal pension product design between the mid-1980s and mid-1990s provides further support for the body of scholarly work on modularisation processes and their relationship with industry change.

Better Regulation: Holding Martin Selmayr Accountable

This time was supposed 'to be different', at least this was the motto of the 2014 European Parliament elections campaign. With less than a year before the next European elections, the time is ripe to examine how different this EU political cycle has actually been. Emboldened by the Spitzenkandidaten process – which established for the first time a link between the outcome of the EU elections and the presidency of the EU Commission –, the Juncker Commission emerged as the most political yet. To shrug off the label of technocratic institution – historically insulated from citizens’ preferences –, the new Commission asked EU citizens to judge its operation by its ability ‘to deliver solutions to the big issues that cannot be addressed by the Member States alone’. While the Better Regulation Agenda might have improved the Commission’s public accountability – with both citizens and stakeholders being better informed about and engaged with EU policy-making –, without however increasing its responsiveness to public preferences. This is the case at the input, throughput and output stage. Rather, the techno-political approach to policymaking – which characterizes the Juncker’s Better Regulation – might have paradoxically led to a compression of participatory democracy and somehow chilled stakeholder engagement. At a time of unprecedented contestation of the EU project – a trend which is combined by a record-demand for new forms of political representation –, it appears paradoxical that the EU – an early promoter of participation – is missing out the chance to seize the momentum to diversify and redesign its participatory structures being busy delivering on its electoral promises no one will ever judge.At the very same time the Juncker Commission has been striving to develop its own, autonomous democratic credentials, its choice to embrace a set of well-defined institutional mechanisms that reward expert judgment over political adjudication appears at odds with its newly-acquired political nature.

Supervisory Board Composition and Firm Financial Performance: A Case of Companies Listed on the Warsaw Stock Exchange

Purpose: This paper investigates the relationship between the internal governance structure and financial performance of Polish companies. Ensuring diversity of corporate boards has been on the agenda of various regulators on a national and international level as it is generally expected corporate boards that are more diverse will be more competent and more effective monitoring managerial actions, and therefore positively impact company performance. Methodology: This paper uses a sample of companies listed on the Warsaw Stock Exchange and examines the two main compositional features of company supervisory boards (independence and experience) and their practices by companies. We also investigate the effect of diversity on company performance. As our empirical methodology, we use linear regression analysis. Findings: Our findings support the proposal that diversity matters, especially in terms of the presence of experienced members on supervisory boards, and that such diversity positively affects financial results. In addition to the main finding, the results of the study indicate also the importance of the ownership structure. Family firms and companies with a higher level of gearing are more likely to perform less effectively. Originality: To date, research on the association between supervisory board diversity and financial performance in either the Polish or Central and Eastern European capital markets has been limited. The paper also points to the importance of having experienced members on a company’s supervisory board. Independent members on supervisory boards do not seem to have a similar association.

A New Labour Ecosystem in the Sharing Economy: A Platform for Growth?

The role of the traditional labour market is being challenged by globalisation and modern technology, particularly the unprecedented and generalised use of smartphones. Online platforms facilitating the on-demand economy are radically changing the prospects for the jobs of the future, which will be less regulated and more inclusive. This paper focuses on online ridesharing platforms, particularly Uber as international market leader, and their potential for combating social inequality and developing the transport industry. Online ridesharing platforms assign private drivers to rides booked and paid for by passengers through an app, using their credit card or PayPal account. The platform’s drivers work as freelance business owners or “moonlight” workers to top-up the income from their regular work. Among these ridesharing service providers are amateur riders who were unable to cope with the tight restrictions of a heavily regulated professional passenger transportation sector, high priced licences, inefficient work-life balance policies and lack of safety guarantees. These barriers to the professional passenger transportation services increase unemployment, and they increase the price of personal transportation for consumers by limiting the market. On-demand ridesharing platform services have been heavily criticised for infringements of workers’ rights. Such arguments are based on the traditional employer-employee relationship, which is being reshaped in these Web 2.0 times. Debate rages as to whether the right to statutory working hours and the right to a stable work site (among others) should still be enforced today. Supporters argue that if pension allowances and work injury benefits must still be granted, this may be done if such platforms are given space to thrive. It is argued that the conditions offered by platforms to drivers encourage entrepreneurship across all segments of society and foster the decentralisation of economic growth. On-demand ridesharing platforms adapt drivers’ income to the market, providing for prime time pricing to meet increased demand. By allowing a fully flexible schedule, they promote work-life balance, and by integrating technology they ensure a more efficient provision of services and a safer one too, with passenger registration, money-free rides and GPS locations an integral part of the operation. This paper stresses the potential of on-demand ridesharing platforms to combat social inequality. Drivers who are excluded from traditional systems due to restrictive language requirements, for example, can openly access these platforms in an intuitive way, often with no other requirements than a driving licence and a reliable car. On-demand ridesharing platforms also absorb certain groups that the labour market tends to resist, such as older workers, for whom ridesharing may top-up their pensions, as well as increase social participation and reduce isolation. On-demand ridesharing platforms have the potential to create economic growth, provided the regulatory burden is reduced. Active participation of citizens and stakeholders in the lawmaking process would ensure that these platforms are aligned with the Better Regulation agenda of the Commission and its strategic policies, while also helping to create conditions for such entrepreneurial operations to thrive.

Qui Exanimis Nascitur? Can “Better Regulation” in the European Union really be a Servant of Technocracy?

AbstractBetter regulation is of grave importance to the European Union, as it is seen as a way of obtaining output legitimacy. To achieve this, the European Commission has established a so-called REFIT Stakeholder Platform where stakeholders’ proposals for more effective and efficient EU law are discussed. The central premise for this meta-regulatory instrument is depoliticisation of the REFIT program and the whole better regulation agenda. To ensure this, the European Commission plays a crucial gatekeeping role by only granting access for proposals that echo that premise and by securing depoliticised deliberation afterwards. Utilising a novel typology linking regulatory reform proposals to the risk of politicisation, the argument advanced in this article is that only a minority of the proposals to be considered by Platform members have a low risk of depoliticisation. This, it is argued, is due to the Commission not having a sufficiently well-developed understanding of the premises for REFIT it has itself established.

Approaches to Develop Alternative Testing Strategies to Inform Human Health Risk Assessment of Nanomaterials.

The development of alternative testing strategies (ATS) for hazard assessment of new and emerging materials is high on the agenda of scientists, funders, and regulators. The relatively large number of nanomaterials on the market and under development means that an increasing emphasis will be placed on the use of reliable, predictive ATS when assessing their safety. We have provided recommendations as to how ATS development for assessment of nanomaterial hazard may be accelerated. Predefined search terms were used to identify the quantity and distribution of peer-reviewed publications for nanomaterial hazard assessment following inhalation, ingestion, or dermal absorption. A summary of knowledge gaps relating to nanomaterial hazard is provided to identify future research priorities and areas in which a rich data set might exist to allow ATS identification. Consultation with stakeholders (e.g., academia, industry, regulators) was critical to ensure that current expert opinion was reflected. The gap analysis revealed an abundance of studies that assessed the local and systemic impacts of inhaled particles, and so ATS are available for immediate use. Development of ATS for assessment of the dermal toxicity of chemicals is already relatively advanced, and these models should be applied to nanomaterials as relatively few studies have assessed the dermal toxicity of nanomaterials to date. Limited studies have investigated the local and systemic impacts of ingested nanomaterials. If the recommendations for research prioritization proposed are adopted, it is envisioned that a comprehensive battery of ATS can be developed to support the risk assessment process for nanomaterials. Some alternative models are available for immediate implementation, while others require more developmental work to become widely adopted. Case studies are included that can be used to inform the selection of alternative models and end points when assessing the pathogenicity of fibers and mode of action of nanomaterial toxicity.

Towards a Regulatory Cycle? The Use of Evaluative Information in Impact Assessments and Ex–post Evaluations in the European Union

As a part of its Better Regulation agenda, the European Commission increasingly stresses the link between different types of regulatory evaluations. Predictions made by Impact Assessments (IAs) could be verified during ex–post legislative evaluations, while ex–post evaluations in turn could recommend amendments to be studied in future IAs. This article combines a dataset of 309 ex–post legislative evaluations (2000-2014) and a dataset of 225 IAs of legislative updates (2003-2014) to show how many ex–post evaluations of the Commission use IAs and vice versa. This way, it explores if the Commission's rhetoric of a ‘regulatory cycle’ holds up in practice. Building on the literature of evaluation use, we formulate the hypotheses that the timeliness, quality and focus of the IAs and evaluations are key explanations for use. Our results show that so far only ten ex–post evaluations have used IAs of EU legislation, while thirty three IAs have used ex–post legislative evaluations. Using Fuzzy set Qualitative Comparative Analysis, we find that timeliness is a necessary condition of the use of ex–post evaluations by IAs, suggesting that for the regulatory cycle to function properly, it is crucial to complete an ex–post evaluation before an IA is launched. Future research could repeat our analysis for evaluations of non–regulatory activities or study the causal mechanisms behind our findings.

Extended Audit Reporting. An insight from the auditing profession in Poland

The audit-reporting model has been on the agenda of researchers and regulators for a long time. The recent regulatory proposals, consultation papers, discussion and research reports on audit reporting have intensified the discussion regarding whether the current standard audit report communicates the appropri-ate information to the users of the report. The Polish auditing model is an interesting case to study in the context of audit reporting. Poland already has experience in the preparation of an additional report, which is aimed at providing more information to all stakeholders. The paper seeks to address two questions. The first one is to what extent the Polish extended audit re-port contributes to the reduction of the expectation and information gaps, and the second question is about the possibilities of improvements of the audit report in general. Based on our interview findings, we conclude that the auditors perceive the audit report to be general-ly useful for its users. However, analysis of the data provides mixed evidence with regard to the extended audit report. Auditors acknowledge the usefulness of the extended audit report to report on additional issues and concerns but, at the same time, the standard form of the extended audit report as prescribed in the Polish Auditing Standards is found to have little information value to its users.

Evaluating the effectiveness of the new EU bank regulatory framework: A farewell to bail-out?

In response to the economic and financial crisis, the EU has adopted a new regulatory framework of the banking sector. Its central elements consist of new capital requirements, the single rulebook, and rules for bank recovery and resolution. These legislations have been adopted to reduce the call for government bail-out of distressed banks in future crises.The present study performs a detailed quantitative assessment of the reduction in public finance costs brought about by the introduction of these rules. We use a microsimulation portfolio model, which implements the Basel risk assessment framework, to estimate the joint distribution of bank losses at EU level. The approach incorporates the complete safety-net set up in EU legislation to absorb these losses, explicitly modelling enhanced Basel III capital rules, the bail-in tool and the resolution funds.Using a near-full sample of commercial, cooperative and savings banks in the EU, we quantify the cumulative effects of this safety-net and the contribution of each individual tool to the total effect. Considering a crisis of a similar magnitude as the recent one, our results show that potential costs for public finances decrease from roughly 3.7% of EU GDP (before the introduction of any new tool) to 1.4% with bail-in, and finally to 0.5% when all the elements we model are in place. This latter amount is very close to our estimate of leftover resolution funds and the size of the Deposit Guarantee Scheme.This exercise extends the quantitative analyses performed by the European Commission in its Economic Review of the Financial Regulation Agenda by developing additional scenarios, crucial robustness checks, simulations for different annual data vintages, and by implementing some methodological improvements.

Repercussions of the European Commission’s Better Regulation Agenda on Consumer Interests and Policy

On the face of it, ‘better regulation’ sounds like a concept that no one could object to. But in contrast to past attempts to cut red tape for business and thus reduce unnecessary bureaucracy, the objective of the Juncker Commission's Better Regulation Agenda is to reduce “regulatory burden”.The package, adopted on May 9th 2015, foresees the establishment of an impressive apparatus and toolbox for implementing the Agenda. Existing structures and procedures, such as the Regulatory Scrutiny Board and the Impact Assessment Guidelines, are being modified, and new elements such as the two REFIT Platforms, one for stakeholders and one for Member States, and the new Interinstitutional Agreement on better law-making, will be introduced.The Agenda raises many questions and concerns From the perspective of a public interest organisation such as The European Consumer Organisation (BEUC). Several aspects of this new institutional and procedural architecture suggest that it is not designed to provide society–wide benefits by generating better regulation for all. Rhetoric about the need to reduce costs is the dominant theme throughout the entire package, framed by the ‘jobs and growth’ narrative.

Coping with European regulatory requirements for automated trading: Best practices and new requirements resulting from regulation

Risks resulting from large trade and order volumes made possible by the automation of trading processes have been steadily climbing the agenda of regulators — even before the publication of books capturing the popular imagination. At the same time, it is widely accepted that automation significantly reduces the risk of ‘classical’ mistakes like fat fingers, with regulation increasingly explicitly or implicitly demanding straight-through processing and setting limits for trade-related processing which, without a highly automated trading environment, are not achievable. Nevertheless, even where automated trading is used only in a conservative way, the volume of trades in a volatile market can impact risk management and order facilities. This paper discusses the implications for operational risk management of the requirements introduced by the Markets in Financial Instruments Directive (MiFID) II in Europe for a firm using automated trading to support market-making and risk management across a number of different markets and products.

Better for Whom?

At first sight, the new “better regulation package” probably appears as one of the most ambitious and comprehensive set of measures on the quality of EU regulation developed in recent years. It introduces relevant innovations as far as both better regulation tools(impact assessment-IA, ex post evaluation, consultation) and governance (the Regulatory Scrutiny Board-RSB, the REFIT Platform and the proposal on the new Inter-institutional agreement on Better Lawmaking-IIA)are concerned. Moreover, the package is a clear demonstration of the Commission's political commitment towards the relaunch of the smart regulation agenda, already proved by its inclusion within the scope of the mandate of the First Vice President, Mr. Timmermans.Nonetheless, ambition and wideness are not the only relevant criteria to judge the package. It could indeed be assessed also from a different perspective, i.e. by analysing the possible effects it could produce and the incentives it could provide for some key players: EU institutions, Member States (MS) and stakeholders.

Which Results? Better Regulation and Institutional Politics

How can one not applaud the renewed better regulation agenda launched by the First Vice President Timmermans? Finally this fuzzy reform field is in the hands of a strong executive politician with the authority to make substantial progress on an agenda that always appeared good on paper, but somehow did not deliver against the expectations it defined for itself. ‘Better regulation for better results’ not only promises tangible results, but it combines this with the ambition of ‘changing how we work at the European level’. This ambition should provide us – as citizens, stakeholders and scholars – with an opportunity to essentially present a scorecard concerning these results in the near future. And, indeed, experts and other stakeholders in the better regulation game do welcome the initiative.My view on this agenda is that the promise of ‘better results’ will be hard to deliver, whereas the ambition of ‘changing how we work’ is more likely to materialize in one way or another.

'Better Regulation': A Bureaucratic Simplification with a Political Agenda

This Working Paper aims to shed light on the machinations behind recent developments regarding the Better Regulation agenda. How should we interpret the Commission’s insistence on relentlessly attacking its own legislation? Why does it constantly refer to the costs, yet never once mention the benefits? Eric van de Abeele, who has already written several publications on the subject, has taken an in-depth look at seven key components of the Better Regulation agenda with a view to unveiling the Commission’s real intentions.

Capital Markets Union and ending short-termism: lessons from the European Commission's public consultation

The European Commission's initiative to establish a Capital Markets Union is in sharp conflict with the more radical goals of downsizing significantly certain financial activities and firms that have become too-big-to-fail and too-big-to-govern and of ending or at least drastically limiting extreme speculation and short-termism in finance and the real economy in order to increase financial stability. The recent public consultation on the Commission's Green Paper, Building a Capital Markets Union gives evidence of how weak such demands are compared to calls for deeper capital markets with more “shadow banking” and rebuilding (sound) securitisation. The consultation is an example of how framing the problem and the refined Better Regulation agenda influence post-crisis financial reregulation and help to marginalise more radical ideas demanding a return to a more traditional banking model and transforming finance back to serving the real economy.

'Better Regulation': A Bureaucratic Simplification with Political Designs

This Working Paper aims to shed light on the machinations behind recent developments regarding the Better Regulation agenda. How should we interpret the Commission’s insistence on relentlessly attacking its own legislation? Why does it constantly refer to the costs, yet never once mention the benefits? Eric van de Abeele, who has already written several publications on the subject, has taken an in-depth look at seven key components of the Better Regulation agenda with a view to unveiling the Commission’s real intentions. He discovered a number of subtle, extremely discreet influences behind the Commission’s prized regulatory impact analyses. In the author’s view, the process to simplify European legislation has “fallen prey to a set of very specific interests”. While the Commission originally wanted to relieve the European Union’s administrative burden, the Better Regulation exercise has ended up creating a parallel bureaucracy staffed by ‘experts’ and other ‘stakeholders’ whose interests are unclear. The path currently being followed by the Better Regulation agenda certainly raises plenty of questions about the European Union’s democratic structure.

Modelling the liquidity premium on corporate bonds

AbstractThe liquidity premium on corporate bonds has been high on the agenda of Solvency regulators owing to its potential relationship to an additional discount factor on long-dated insurance liabilities. We analyse components of the credit spread as a function of standard bond characteristics during 2003–2014 on a daily basis by regression analyses, after introducing a new liquidity proxy. We derive daily distributions of illiquidity contributions to the credit spread at the individual bond level and find that liquidity premia were close to zero just before the financial crisis. We observe the time-varying nature of liquidity premia as well as a widening in the daily distribution in the years after the credit crunch. We find evidence to support higher liquidity premia, on average, on bonds of lower credit quality. The evolution of model parameters is economically intuitive and brings additional insight into investors’ behaviour. The frequent and bond-level estimation of liquidity premia, combined with few data restrictions makes the approach suitable for ALM modelling, especially when future work is directed towards arriving at forward-looking estimates at both the aggregate and bond-specific level.

Placebo-controlled trials in pediatrics and the child's best interest.

For too long children have received medicines not sufficiently studied for their needs and, in fact, being considered as small replicas of adults, it was deemed sufficient to adjust the dosage of a drug approved for adults. Together with the limited availability of appropriate drug formulations, especially for neonates and toddlers, this approach has caused increased iatrogenic risk and/or suboptimal adherence to treatment. With the aim of encouraging the development of more efficacious and safer medicines for children, the Regulatory Agencies in Europe and U.S.A. commendably issued directives to promote adequate and well controlled pediatric clinical trials. In compliance with the agenda of the Pediatric Regulation, in the past decade the number of pediatric patients enrolled in double-blind randomized clinical trials (RCTs) is markedly increased. In order to establish the efficacy of new medicines, RCTs frequently include a placebo-control group that carries the burden of additional, and to some extent underestimated, ethical concerns with respect to trials in adults. Six years into the Pediatric Regulation implementation, off-patent drugs, most of which at present are extensively used off-label, are underrepresented in ongoing/proposed pediatric RCTs. We debate this status quo to assess what might be the child’s best interest. In fact, we argue that well-designed studies, in which efficacy and safety of new drugs are compared to off-patent drugs that are currently prescribed off-label, would achieve the aim of the Pediatric Regulation better and more ethically than placebo controlled RCTs.

British utility regulation: Consolidation, existential angst, or fiasco?

More than thirty years since the ‘Littlechild Report’ put forward an agenda for incentive-based and competition-driven regulation, the time has come to reconsider its legacy. This article places the debates surrounding utility regulation in context. First, it suggests that at least three dominant interpretations exist regarding the legacy of the Littlechild Report. Second, this article explores the original theoretical arguments that underpinned the proposals underpinning the Report. Third, this article considers the contemporary challenges for utility regulation in the UK and elsewhere. Despite considerable concern about the state of utilities, and of utility regulation, the legacy of market-oriented regulation has been consolidated, especially in telecommunications.

A “Win-Win-Win” Scenario – Reaping the Benefits of an EU Law on Administrative Procedure

A Law on Administrative Procedure (LAP) is an essential institutional feature of democratic and effective governments. It is a general law on executive law-making, setting out how laws and regulations should be made. The need for a LAP at EU-level is growing – to counter the EU's legitimacy deficit and to make the regulatory process more predictable and robust. At the same time, the EU regulatory “machine” faces new challenges and pressures, as it seeks to implement highly complex (risk management) regulation. Greater regulatory effectiveness depends on more transparency, evidence quality standards and participation. As such, an EU LAP appears to be the natural culmination of the EU Smart Regulation agenda. Since the European Parliament in 2013 called for the Commission to adopt a LAP-related legislative proposal, the debate has gained in visibility and political salience. This article makes the case for an EU LAP for the EU institutions, citizens and businesses – provided the Law enshrines the four key principles of good administration (transparency and consistency; public participation; public record; and accountability); it establishes clear and legally binding procedural standards; and it covers as a principle also rule-making and adjudication decisions by all EU institutions and bodies involved in the preparation, adoption, implementation and repeal of secondary legislation.