Q&A with Claudia Robles-Garcia, the CEPR-TFI prizewinner 2018

Posted on November 12, 2018

Fostered by a pair of academic parents and an unquenchable curiosity, our 2018 prizewinner Claudia Robles-Garcia grew up wanting to be a renowned researcher. Winning the CEPR-TFI award in September 2018 put her on the map. Up next: landing a job anywhere in the world, ideally a professorship at a university that stimulates innovative work. She dreams only of places bubbling with excellent students and even better colleagues. ‘Quoting Picasso: inspiration exists, but it has to find us working.’

“We pick topics that are policy relevant and team up with central banks and regulators to make an impact!”

TFI: “You and our previous prizewinner, Matteo Benetton, share the same mentor at the London School of Economics. It must be a winner’s mindset with which he has infused you both…”

CRG: “It can’t be coincidence, can it? Professor Gavazza has an excellent approach to mentoring, that’s for sure. When his PhD students knock on his door with yet another research problem, he’s generally very supportive. His expectations are high, both in terms of hard work and research ideas, but his encouragement makes us think of problems as challenges. Also, he stimulates us to pick topics that are policy relevant. We want to make an impact. That’s why we team up with central banks and regulators like the Financial Conduct Authority (FCA), where I work as a research analyst. This position gives me access to rich administrative datasets with millions of observations, and colleagues with extensive knowledge of the industry. A killer combo.”

TFI: “In the winning paper, you discuss what would happen if mortgage brokers didn’t exist, bam!”

CRG: “It’s a topic born out of frustration and fascination. A friend was trying to buy a house, you see, and we faced so many dilemmas that it knocked me over. The UK offers over 2.000 mortgage products! After a while even I – with my background in economics and my genuine interest in the subject – couldn’t see the wood for the trees. So what did my friend end up doing, like so many inexperienced first-time buyers? She seeked advice by hiring a broker. But then we found that each broker is, in essence, a potentially biased middleman: paid by the firms who sell the very same products people are being told to buy. Crazy, right? And it’s about so much money! It intrigued me, so I pretty much turned the topic into into my thesis.”

“Banning the brokers completely is not the solution: it will solve one problem to create an even bigger one.”

TFI: “So in a nutshell: are we better off without mortgage brokers?”

CRG: “If you ask me, they’re the better of two evils. Brokers’ advice can be biased by payments from banks, but they also reduce the costs for consumers and lenders alike. Brokers help smaller banks (without numerous branches or large marketing budgets) to introduce new products. Small banks would hardly have any visibility if brokers were forbidden. Banning them completely is not the solution, since it will solve one problem to create an even bigger one. There’s no such thing as a free lunch, you know. In the paper, I suggest limiting financial relationships between banks and brokers, for example, by imposing a limit or a cap on the total payments they can exchange. However, it is an industry experiencing many changes due to new technologies: robo-advice for example may revolutionize the broker business.”

TFI: “You sound like a true chess master!”

CRG: “Haha, thanks. I actually am, but I’m no longer competing, unlike the true masters Fabiano Caruana and Magnus Carlsen. Did you know they’re competing against each other the next three weeks? They’re fighting until November 28th to become the next World Chess Champion – in London of all places! Can’t wait to see who the new number one is.”