Measuring our impact before we intervene

Our group of publications aim to give our stakeholders a clear picture of how we assess the likely impact of our policies:

• How we analyse the costs and benefits of our policies - February 2024 (PDF) 
• When and how we use field trials (PDF)
• Occasional Paper No. 39: Estimating the benefits of interventions that affect consumer behaviour

To continuously improve our Cost Benefit Analysis (CBA) practices and methods, we also undertake and commission research externally. This ensures our CBA practitioners can draw on the latest and most relevant evidence and best practice methodologies when assessing the impact of our policies:

• The wellbeing effects of debt and debt-related factors
• Valuing consumers’ time in our Cost Benefit Analysis  

We also separately set out how we evaluate our work.

Measuring our impact before we intervene

Related links

How we analyse the costs and benefits of our policies - February 2024 (PDF)

We first published our approach to CBA in 2018. This new publication gives an update, explains the core principles of our methodology, expands on how we estimate benefits and updates our Standardised Cost Model. 

The Financial Services and Markets Act 2000 requires us to establish an independent CBA Panel and prepare and publish a Statement of Policy (SoP) on CBA after consultation with the Panel. Later in 2024 we will establish the CBA Panel and consult them on our approach to CBA, along with the other elements that will eventually form our published SoP.

When and how we use field trials (PDF)

‘When and how we use field trials’ clarifies when we consider it appropriate to undertake field trials to gather evidence for our policies. It covers some broad principles on when we are more likely to use field trials including feasibility, impact and proportionality. 

It also sets out the typical stages of field trials we conduct. It is intended to help firms and practitioners understand our use of field trials and what firms can expect if they partner with us on a field trial.

Occasional Paper No. 39: Estimating the benefits of interventions that affect consumer behaviour

The paper aims to help us estimate the benefits of our interventions, while recognising the challenges. 

It focuses on how the benefits of regulations that intend to improve outcomes for consumers could be captured. In retail environments where behavioural biases are prevalent, we cannot assume that consumers make optimal decisions that are aligned with their own interests. 

Many of our regulations intend to improve those decisions, yet the claimed benefits of such improvements are seldom measured. The paper describes a few available techniques to monetise benefits and their application in financial services markets.

The wellbeing effects of debt and debt-related factors (PDF)

The Simetrica-Jacobs (2020) research estimates and monetises the impact of debt on subjective wellbeing for potential use in cost benefit analysis for FCA market interventions. Subjective wellbeing is a standardised approach to measuring the wellbeing (or happiness) of individuals.

The research estimates the subjective wellbeing effects of entering into different types of debt (for example, credit card and mortgage debt) and changes in levels of indebtedness.

Valuing consumer’s time in our Cost Benefit Analysis (PDF)

Among the benefits and costs considered in our CBAs are time savings or losses accruing to individual consumers because of our interventions. In principle, a minute less (more) time spent dealing with financial products and services implies a minute more (less) time for other leisure activities - thereby generating a benefit (cost) for consumers.

There is no definitive evidence on the value of time saving/losses in the finance context. So, our recent practice has been to ‘transfer’ values of leisure time from the Department for Transport's ‘Transport Analysis Guidance’. This research study assesses the defensibility of this practice, generally providing support for it and proposing sensitivity tests we can consider to provide additional assurance under certain scenarios.

We intend to keep our approach to measuring impact up-to-date, and welcome views from stakeholders about our approach and techniques. 

For more information, contact: [email protected] on Cost Benefit Analysis.