The FCA has published Occasional Paper No.13: Economics for Effective Regulation(EFER), which discusses how EFER can help the FCA meet its new challenges and achieve its objective to ‘make the relevant markets work well.’

EFER is a new approach to economic analysis of financial services and has three key stages: 1) problem diagnosis; 2) intervention design; and 3) impact assessment.

The paper describes the above stages, explains how the stages support effective regulation and provides tools for applying the framework in practice. The tools will help regulators identify the underlying problems in the markets and the harm that may arise as a result.  They will also help regulators assess what interventions could best remedy the issues.