The Challenge of the Early Years
Edited by Marco Buti and André Sapir
Chapter 12: EMU and Financial Market Structure
12. EMU and ﬁnancial market structure Harry Huizinga* 1. INTRODUCTION The introduction of the euro on 1 January, 1999 was a watershed event for Europe’s economies and especially for its banking and ﬁnancial markets. The elimination of exchange rate risk and the greater price transparency oﬀered by the single currency aﬀect ﬁnancial markets more quickly and deeply than any other markets. Almost from the start, the interbank money market in the euro area became fully integrated, and there was a remarkable pick-up in issuance volume in the corporate bond market. Monetary uniﬁcation also brought down yield diﬀerences in the government debt market. At least as important, the euro brought in full view the fragmentation and costliness of the exchange and settlement structure of European ﬁnancial markets. In this area, the euro has proven an important catalyst for change towards increased consolidation. An example of this is the birth of Euronext, a merger of the Amsterdam, Brussels and Paris bourses. In the years to come, further alliances of this kind are likely to lead to a radically changed ﬁnancial landscape. Bank consolidation, much anticipated before EMU, also has proceeded, be it at a subdued pace. No panEuropean mega-banks have been formed yet. The likely further consolidation of Europe’s capital and banking markets is also prompting a new look at current regulatory and supervisory arrangements in Europe, with an emphasis for now on the regulation of European securities markets. At the start of the new millennium, signiﬁcant...
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