BVI paper on ban on inducements
No higher returns for private investors, less participation in capital markets
A ban on inducements does not increase returns for private investors but causes less participation in capital markets. This is the result of a BVI analysis of public data from the European Central Bank and the UK’s Office for National Statistics on financial assets from the beginning of 1999 to the end of March 2023. The paper analyses portfolio returns and net investments in funds. The portfolio return was defined as the quarterly change in financial assets adjusted for transactions. By design, the fund association ruled out that country-specific effects – such as different pension schemes – or different capital market returns before and after the introduction of the commission bans are falsely counted as a result of bans.
To facilitate further research on this important matter, all data, methods, and code used are available upon request.
Markus Michel, Head of Research at BVI, explains the effects of a ban of inducements and where the EU Commission gets it wrong.