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Creating and Governing an Integrated Market for Retail Banking Services in Europe

A Conceptual-Empirical Study of the Role of Regulation in Promoting a Single Euro Payments Area

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Matthäus Markus Sielecki

The creation of the Economic and Monetary Union (EMU) has accelerated the harmonization process of regulation and governance in Europe. However, the integration of fragmented retail banking markets still represents a difficult task for regulators. This book investigates the role of EU policy in creating a single market, addressing explicitly questions on the choice of policy measures to overcome barriers to integration persistent in these markets. Based on an analysis of different regulatory theories, the author develops a conceptual framework and illustrates its applicability to the case of the Single Euro Payments Area (SEPA) initiative. The fact that a single market has not yet evolved is less a sign of market or coordination failures than of government failures. The author concludes that, despite the political resistance from national interest groups, regulatory barriers need to be removed first to provide a level playing field for banks and a safe legal environment for consumers.

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D Conceptual model 93

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93 D Conceptual model 1. Objective and approach The previous chapters showed that there is a considerable body of literature on regulatory impact assessment in general and cost-benefit analysis in particular. The existing studies often fail to provide a comprehensive understanding of the elements of benefits that regulation may be delivering, or to discuss how differ- ent types of potential benefits can be measured. Empirical cost-benefit studies of regulation often concentrate on the quantification of costs, leaving the benefits assessment aside for a qualitative discussion. Measurement efforts or an explicit analysis of the mechanism through which regulation is expected to deliver the promised change, have been neglected in large part. Therefore, the conceptual model outlined in this chapter adopts a financial regulation impact assessment framework developed by Oxera (2006) for the U.K. Financial Services Agency (FSA). The theoretical consideration to assess market failure, government fail- ure and coordination failures, as well as the implication of the territorial dimen- sion of regulation in terms of policy uploading and downloading, are incorpo- rates into the conceptual framework. Based on the preceding review of existing literature, the research framework of this study aims to refine measurement of regulatory interventions. In order to test the research hypothesis and to investigate whether regulation can act as a catalyst to reach a certain market outcome that is superior to one without regula- tion, a two-step analysis is performed: First, the key decision factors that may be considered by regulators to choose a targeted regulatory intervention need...

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