Banking Business Models Monitor 2014: Europe. CEPS Paperbacks, 14 October 2014

CEPS and the International Observatory on Financial Services Cooperatives (IOFSC) at HEC Montreal have initiated an annual monitoring exercise on banking business models in the EU. Based on their balance sheet structures, 147 European banks that account for more than 80% of the industry assets were categorised in four business models. The Monitor emphasises the ownership structures and assesses the financial and economic performance, resilience and robustness, before, during and after the financial and economic crises across retail diversified-, retail focused-, investment-, and wholesale oriented banks. Inter alia, this edition of the Monitor finds that banks that engage more in traditional retail banking activities with a mix of funding sources fared well as compared to other bank models during the different phases of the crisis.

Does the European Union create the foundations of an information society for all? Bruges European Economic Policy (BEEP) Briefing 11/2005

In order to increase the use of information and communication technologies (ICT) in the European Union Member States, the European Commission, on the initiative of Commissioner E. Liikannen, launched in December 1999 a bold programme called “eEurope”. Soon after its creation, the eEurope programme was integrated into the so- called Lisbon agenda for Europe to become the “most advanced knowledge based economy” in the world. We try to assess if the programme is successful in achieving its stated objective of promoting a knowledge based economy through the development of an “information society for all”. First, we conclude that eEurope, due to its origins and its procedures, has intrinsic limits both as regards its scope and effectiveness. Second, we show how Member States have adopted different trajectories towards the “knowledge based society”. To identify these heterogeneous paths of growth, we have selected a set of variables that, combined together, represent the institutional arrangements specific to a country or a group of countries. We found sharp differences between two advanced models that we label, respectively, as Scandinavian and Anglo-Saxon. Without asserting the superiority of a model, we propose policy orientations to help Europe overcome those gaps hindering the move towards knowledge economies where information society technologies are widely diffused.

Informational Barriers to Energy Efficiency - Theory and European Policies. Bruges European Economic Research (BEER) Papers 15/2009

This BEER addresses informational barriers to energy efficiency. It is a widely acknowledged result that an energy efficiency gap exists implying that the level of energy efficiency is at an inefficiently low level. Several barriers to energy efficiency create this gap and the presence of asymmetric information is likely to be one such barrier. In this article a theoretical framework is presented addressing the issues of moral hazard and adverse selection related to energy efficiency. Based on the theoretical framework, European policies on energy efficiency are evaluated. The article is divided into two main parts. The first part presents the theory on information asymmetries and its consequences on energy efficiency focusing on the problems of moral hazard and adverse selection. Having established a theoretical framework to understand the agency barriers to energy efficiency, the second part evaluates the policies of the European Union on energy efficiency. The BEER finds that problems of moral hazard and adverse selection indeed can help explain the seemingly low levels of energy. In both presented models the cost to the principal from implementing high energy efficiency outcome is increased with the informational asymmetries. The theory reveals two implications to policies on energy efficiency. First, the development of measures to enable contractual parties to base remuneration on energy performance must be enhanced, and second, the information on technologies and the education of consumers and installers on energy efficiency must be increased. This could be complemented with certification of installers and energy efficiency advisors to enable consumers to select good agents. Finally, it is found that the preferred EU policy instrument on energy efficiency, so far, seems to be the use of minimum requirements. Less used in EU legislation is the use of measuring and verification as well as the use of certifications. Therefore, it is concluded that the EU should consider an increased use of these instruments, and in particular focus on a further development of standards on measurability and verification as well as an increased focus on education of consumers as well as installers and advisors on energy efficiency.

Regional Wage and Employment Responses to Market Potential in the EU. Bruges European Economic Research (BEER) Papers 3/November 2005

Recent theoretical work on economic geography emphasizes the interplay of transport costs and plant-level increasing returns. In these models, the spatial distribution of demand is a key determinant of economic outcomes. In one strand, it is argued that higher demand gives rise to a more than proportionate increase in production, a result known as the home market effect. Another strand emphasizes the effects of market sizes on factor prices. We highlight the theoretical connection between these two strands. Using data on 57 European regions, we show how wages and employment respond to differentials in what we call real market potential, a discounted sum of demands derived from the theory.

A Microsimulation of the Impact of Tax Reforms on Child Poverty: the Case of Italy. Bruges European Economic Research (BEER) Papers 29/February 2014

Microsimulation models have been used in order to find efficient counteractive instruments to poverty. The objective of this paper is to analyse the impact of fiscal policy on poverty, insisting on child poverty rates. Empirical analysis suggests that in fighting poverty, a mix of policies need to be in place, fiscal reforms increasing tax allowances such as child benefit granted to parents with dependent children, are not sufficient to reduce child poverty.

Eurozone Crisis and Social Models: What We Can Learn from Italy and Spain. CES Papers - Open Forum #20, 2013-2014

This paper considers the role of social model features in the economic performance of Italy and Spain during the run-up to the Eurozone crisis, as well as the consequences of that crisis, in turn, for the two countries social models. It takes issue with the prevailing view - what I refer to as the “competitiveness thesis” - which attributes the debtor status of the two countries to a lack of competitive capacity rooted in social model features. This competitiveness thesis has been key in justifying the “liberalization plus austerity” measures that European institutions have demanded in return for financial support for Italy and Spain at critical points during the crisis. The paper challenges this prevailing wisdom. First, it reviews the characteristics of the Italian and Spanish social models and their evolution in the period prior to the crisis, revealing a far more complex, dynamic and differentiated picture than is given in the political economy literature. Second, the paper considers various ways in which social model characteristics are said to have contributed to the Eurozone crisis, finding such explanations wanting. Italy and Spain ́s debtor status was primarily the result of much broader dynamics in the Euro- zone, including capital flows from richer to poorer countries that affected economic demand, with social model features playing, at most, an ancillary role. More aggressive reforms responding to EU demands in Spain may have increased the long term social and economic costs of the crisis, whereas the political stalemate that slowed such reforms in Italy may have paradoxically mitigated these costs. The comparison of the two countries thus suggests that, in the absence of broader macro-institutional reform of the Eurozone, compliance with EU dictates may have had perverse effects.

The Business Models and Economics of Peer-to-Peer lending. ECRI Research Report No 17, May 2016

This paper reviews peer-to-peer (P2P) lending, its development in the UK and other countries, and assesses the business and economic policy issues surrounding this new form of intermediation. P2P platform technology allows direct matching of borrowers’ and lenders’ diversification over a large number of borrowers without the loans having to be held on an intermediary balance sheet. P2P lending has developed rapidly in both the US and the UK, but it still represents a small fraction, less than 1%, of the stock of bank lending. In the UK – but not elsewhere – it is an important source of loans for smaller companies. We argue that P2P lending is fundamentally complementary to, and not competitive with, conventional banking. We therefore expect banks to adapt to the emergence of P2P lending, either by cooperating closely with third-party P2P lending platforms or offering their own proprietary platforms. We also argue that the full development of the sector requires much further work addressing the risks and business and regulatory issues in P2P lending, including risk communication, orderly resolution of platform failure, control of liquidity risks and minimisation of fraud, security and operational risks. This will depend on developing reliable business processes, the promotion to the full extent possible of transparency and standardisation and appropriate regulation that serves the needs of customers.