Reinsurance in the EU: voluntary or mandatory regulation?

The European Parliament has recently approved proposals to harmonise establishment and supervision rules of reinsurance as a way of promoting the single market in financial services. This legislation will introduce mandatory licensing by competent home country authorities and will require changes to the way reinsurance is regulated in a number of Member States. Has the right choice been made between voluntary or mandatory regulation?

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Risky business: do European investors need protection?

Retail investors are exposed to a range of risks when engaging an investment firm to carry out services on their behalf. What are the main risks, and how adequate are current arrangements to protect investors? These questions are addressed in a report published this month, prepared by Oxera for the European Commission, which focuses on the statutory investor compensation schemes established in the EU Member States

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Has yardstick competition had its day?

Given the risks and costs involved in setting targets for regulated companies based on the performance of a handful of comparators, why do regulators continue to use frontier benchmarks, when there are cheaper and more conservative approaches available to them? Furthermore, what lessons can be learnt from the UK experience for those implementing incentive frameworks?

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Product migration: a problem for market definition?

There are markets where consumers migrate from one product to another—for example, from dial-up Internet to broadband, or from VHS to DVD. Competition investigations often question whether the old and new products should be treated as competitors. Policy practice is not always consistent. Can economic theory offer any answers?

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Which WACC when? A cost of capital puzzle

Real or nominal? Pre-tax or post-tax? (Or even vanilla?) The number of 'flavours' for calculating the weighted average cost of capital is sometimes bewildering. It is often assumed that they all reach more or less the same conclusion, but is this always the case? Contrary to common belief among practitioners, different styles of calculation have a material impact on the value of cash flow to investors.

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One size fits all? Cost allocation in postal services

Regulators face difficult challenges in allocating indirect costs such as overheads and network costs. One method of doing so, equi-proportionate mark-up, has recently been adopted in the telecoms sector. Based on this precedent, Postcomm, the UK postal services regulator, has concluded that it is also appropriate for the postal sector. Is this the case?

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Watching 3G: sector inquiries by the European Commission

In June, the European Commission launched sector competition inquiries into financial services and energy. The first such inquiry since modernisation relates to sports services over 3G mobile telephony networks. The methodology and preliminary results of that inquiry were recently made public, and contain some relevant lessons for future inquiries

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One share, one vote? Golden shares in privatised companies

Shareholder rights are a matter for corporate governance, providing checks and balances so that company management is subject to proper oversight. Among the impediments to shareholders playing an effective role as owners are special control rights, or ‘golden shares’, retained by governments in privatised companies. What are these impediments, and how important are they?

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Supermarket price wars: is government intervention needed?

Following the debate over the fierce price war between supermarkets in the Netherlands, the Dutch government has announced its decision not to introduce a rule that would prevent retailers from selling below the purchase price. Several other European countries do have such a rule in place. This article explores the economic effects of minimum price rules and discusses the existing empirical evidence, including a study by Oxera.

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Over-indebtedness: what’s new?

Since the publication in 2004 of Oxera's study on over-indebtedness in the UK, consumer borrowing has continued to rise, passing the £1 trillion threshold, and the level of household debt continues to make the headlines. Yet the latest data does not suggest that current levels of indebtedness are unsustainable. What are the recent trends in indebtedness and what progress have the government and the banking community made in this area in the past year?

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Financing the water industry: lessons from PR 04

The 2004 water industry price control review, and the parallel review in the electricity distribution industry, tackled important issues that are relevant for the future of utility regulation in the UK in these sectors and more widely. Keith Palmer, NM Rothschild & Son and Cambridge Economic Policy Associates, and Hannah Nixon, Cambridge Economic Policy Associates, discuss the lessons that can be learnt.

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