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European financial system
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The European financial landscape has changed dramatically over the last couple of years and the pace of change appears to have moved into a higher gear with the establishment of Economic and Monetary Union (EMU). However, although EMU and the introduction of the euro have played a pivotal role in the changes the European financial system has been undergoing, a host of other factors can be identified that in parallel with the euro contributed to the transformation of the European financial system.
First, progressive steps in the process of European economic integration have laid the foundations for financial market integration and a surge in cross-border trading, in particular in money markets, wholesale banking and bond markets. The process of European financial integration was initially given impetus by the Single European Act (SEA), which came into force in 1987 and provided the basis for the establishment of an internal market for goods, persons, services and capital. In parallel the Member States embarked upon a process of capital liberalisation. The first stage of EMU began on 1 July 1990 with the liberalisation of capital movements (see European Council, 1988).1 More recently, European policy makers have agreed upon an even more ambitious agenda of measures, the so-called Financial Services Action Plan (FSAP; see EU Commission, 1999). Building on the achievements of the internal market, the FSAP puts forward 43 legislative measures to achieve three objectives: 1) a single EU market for wholesale financial services, 2) open and secure retail markets and 3) state-of- the-art prudential rules and supervision. The implementation of these measures by 2005 should create a truly integrated market for financial services in the European Union. All these initiatives were inspired by economic theory, supported by empirical evidence, claiming that the integration and development of financial markets is very likely to contribute to economic growth by increasing the efficiency of the allocation of capital (see e.g. Pagano, 1993; Levine, 1997; Giannetti et al., 2002; and London Economics, 2002). In this context, the European monetary integration process in general, and the introduction of a single currency in particular, albeit very important, were from an economic point of view merely one of the many steps in this process of gradual financial integration in Europe. They also acted as a catalyst to further financial market initiatives contributing to integration
Philipp Hartmann - Personal Name
1st Edtion
92-9181-348-6
NONE
European financial system
Management
English
European Central Bank
2013
Germany
1-336
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