André Uhde

Wealth Effects of Credit Risk Securitization in European Banking

Using a unique cross-sectional dataset of 381 cash and synthetic securitizations issued by 53 banks from the EU-15 plus Switzerland between 1997 and 2007, this paper provides empirical evidence for time-dependent negative wealth effects of credit risk securitization announcements in European banking. Baseline results hold when comparing estimated wealth effects with a control group of similar but non-securitizing banks for the relevant time period. Moreover, building several sub samples we find that the nexus between credit risk securitization, the issuing banks’ overall risk exposure and wealth effects is associated with a variety of transaction- and bank-specific factors.

Credible Threats as an Instrument of Regulation for Network Industries

In order to avoid over-regulation, some countries have experimented with what might be called threat-based regulation. The idea is - similarly to the contestable market model - that actual regulation may not be necessary as long as the threat of regulation is credible. In that case, so the idea, even monopolies will abstain from setting monopolistic prices in order to avoid being regulated. As experience from Germany and New Zealand has demonstrated, there are quite a number of problems associated with threat-based regulatory systems. The most significant problem has turned out to be the likely under-regulation and according welfare losses from market power, and in this context, a critical issue that has been identified is the credibility of the regulatory threat. If the threat of regulation is not credible, a light-handed regulatory regime (LHRR) amounts to leaving monopolistic firms unregulated, clearly an undesirable situation from a welfare point of view. This failure of threat-based regulatory systems results from potential free-rider problems associated with good corporate behaviour (as in the case of Germanys electricity market) as well as the lack of credibility of the threat either because of the weakness of the enforcement authorities or due to political constraints. Furthermore, a problem emerges if exercising the threat of regulation implies an abandonment of the LHRR and a corresponding substitution with heavy-handed ex ante regulation. An innovative way out of this dilemma has been the quasi-automatic threshold system originally designed for New Zealands electricity distribution networks, which aims at simulating the pressures that companies would face in competitive markets.

Regulierung und Wettbewerbsrecht in liberalisierten Netzindustrien aus institutionenökonomischer Perspektive / Regulation and Competition Law in Liberalised Network Industries as Seen from a New Institutional Economics Perspective

Zusammenfassung Die Liberalisierung netzgebundener Industrien muss regelmäßig über die Kontrolle der Marktmacht der früheren Monopolunternehmen erfolgen. Dies kann zumindest theoretisch nicht nur durch eine Ex-ante-Regulierung einer auf eine begrenzte Anzahl von Sektoren spezialisierten Institution wie die Bundesnetzagentur erfolgen, sondern auch durch eine Ex-post-Missbrauchsaufsicht einer sektorübergreifenden Wettbewerbsbehörde wie das Bundeskartellamt. Auf den deutschen Elektrizitätsmärkten oblag die gesamte Kontrolle bis 2005 dem Bundeskartellamt, bevor dann die Bundesnetzagentur als sektorübergreifende Regulierungsbehörde eingerichtet und ihr die Kontrolle über die Netznutzungsentgelte übertragen wurde. In den Bereichen der Flughafenregulierung und für Telekommunikationsmärkte ist die Debatte „Ex-ante Regulierung oder Ex-post Aufsicht” jedoch noch lange nicht beendet. Der vorliegende Beitrag zeigt, dass eine solch einfache Dichotomisierung der Komplexität der Problematik und der Vielfalt der institutionellen Ausgestaltungsmöglichkeiten nicht gerecht wird. Vielmehr hängt die Empfehlung für die institutionelle Ausgestaltung des Regulierungsrahmens in netzgebundenen Industrien maßgeblich von der vollzogenen und absehbaren Entwicklung des Wettbewerbs und damit von der tatsächlichen Regulierungsbedürftigkeit des jeweiligen Marktes ab. Der vorliegende Beitrag entwickelt dazu, ausgehend von dem für Telekommunikationsmärkte entwickelten 3- Kriterien-Test, weitere Elemente zur Ausdifferenzierung der Regulierung. Vernünftige Ansätze enthält auch das deutsche Telekommunikationsgesetz (TKG). Eine sektorspezifische Missbrauchsaufsicht oder eine Ex-post-Regulierung, wie das TKG sie ermöglicht, bieten einerseits den Vorteil, dass sie der politökonomischen Überregulierungstendenz entgegenwirken, sind allerdings andererseits auch mit nicht unerheblichen Kosten und Risiken verbunden, was die intersektorale Konsistenz des Wettbewerbsrechts und die Anfälligkeit für politische Einflussnahme angeht. Insofern wäre eine sektorspezifische Missbrauchsaufsicht unbedingt mit einer Sunset-Klausel zu verbinden, die einen Übergang in das allgemeine Wettbewerbsrecht sicherstellt. Die Expost- Regulierung kann dann jedoch den Ausstieg aus der Regulierung durch das Herabklettern der Instrumentenleiter ermöglichen und so den Einstieg in den Ausstieg aus der sektorspezifischen Regulierung dort ermöglichen, wo dies wünschenswert ist. Summary The most crucial task for the liberalisation of network industries is the control of the incumbent’s and former monopolist’s market power. In theory, this can be effected either through ex ante regulation by a special agency, which focuses on a limited number of industries, such as the Federal Network Agency in Germany, or through ex-post control by general competition authorities such as Germany’s Federal Cartel Office. For the German electricity market, the Federal Cartel Office was in charge of controlling market power until 2005, when the Federal Network Agency as established as the regulator in charge of controlling network prices. For telecommunications and airports the debate over “ex-ante regulation vs. ex-post control” is not over yet, however. This paper shows that such a simple dichotomisation neither captures the complexity of the problem nor the diversity of possible institutional arrangements. Any recommendation on the institutional design of the regulatory framework should depend on how competition has developed in the past what can be expected for the future. We develop elements for a further differentiation of regulatory measures, based on the so-called 3- criteria-test applied in European telecommunications markets. The German Telecommunications Act (TKG) also contains reasonable approaches. Sector-specific ex post control of market power and ex post regulation, as envisaged by the TKG, have the advantage of countervailing well-known tendencies of overregulation. However, the consistency of competition law across sectors may suffer, and the regulator may be more prone to regulatory capture than a competition authority. Therefore, we argue that any sector-specific ex post control should be accompanied by a sunset clause to guarantee the transition into general competition law. Ex post regulation can, however, facilitate a faster exit from sector-specific regulation by climbing down the so-called ladder of remedies.