Chapter 9: A Single Financial Market and Multiple Safety-Net Regulators: The Case of the European Union
María J. Nieto* FINANCIAL INTEGRATION IN THE EUROPEAN UNION: THE ‘CUTTING-EDGE’ OF FINANCIAL GLOBALIZATION 1 In the late 1950, the founding fathers of the European Union (EU) put the member countries on a course toward a single financial market. The main purpose of the Treaty of Rome (1957) was to create a common market where goods, services, people and capital could move freely, including the free provision of financial services. In spite of the political momentum, until the end of the 1970s, not only was the financial sector heavily regulated, but the financial markets were also highly fragmented. Ever since, the integration of the financial markets has been an ongoing project with important landmarks (see Box 9.1) but considerable challenges. The opening of the capital accounts in the late 1980 and particularly the launching of the single currency (the euro) gave a significant thrust to financial integration. At present, the financial integration within the EU is relatively advanced and can be regarded as the ‘cutting-edge’ of financial globalization (Berrigan et al., 2009). Integrated money and capital markets need to be supported by a well-functioning and integrated market infrastructure. The European Monetary Union (EMU) fostered this integration because the central banks of the countries that belong to the euro and the European Central Bank (ECB), which together constitute the Eurosystem, have developed facilities in the field of payment and settlement systems. The degree of market integration varies considerably across the different market segments, depending partly on the characteristics of the...
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