Graham Bishop, Nick CanningAn analysis of the quality of the 'impact assessments' of the directives of the FSAP, and an assessment of whether potential costs are likely to outweigh the benefits.
Link to PDF of full report
SummaryOne of the major criticisms of the Financial Services Action has been that insufficient cost-benefit analysis has been carried out on the directives. For example, HM Treasury, the Financial Services Authority and the Bank of England wrote in ““The EU Financial Services Action Plan: A Guide”, July 2003:
“Many market experts consider that the Commission should analyse in more detail the cost-effectiveness of proposed new FSAP measures, and the interaction between them. Their impact needs to be considered, not just on market behaviour and the efficiency of financial markets within the EU, but also on the EU ’s global competitiveness, and in particular in relation to the US.”
The Commission’s “impact assessments” for each measure are inadequately detailed, especially in financial terms.
However, some detailed estimates have been made of the overall benefits of European financial integration. These add up to an annual benefit to the EU economy after 10 years of at least EUR189bn.
To outweigh this public benefit, the annual private cost of each of the 40 measures would have to be nearly EUR5bn.
The consultancy OC&C estimates the cost to the EU of the currently proposed investment services directive to be up to EUR450m per annum.
That is why the original Lamfalussy report was right to conclude, “It is not simple to quantify the net sum of these benefits, but potentially they are large”.
Political leadership is required if those facing relatively small private costs are more vocal than a mass public which might experience a large collective benefit.
Contents
Executive Summary
The Benefits
Commission “impact assessments”
Impact Assessments – A Private Sector Example
Appendices
1. Summary of London Economics report
2. Executive Summary of ZEW/IEP report
3. Summary of key findings of OC&C report
Figures
Link to spreadsheet of all European Commission Impact Assessments
© Graham Bishop
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