Five years ago, the Centre for Economic Policy Research (CEPR) produced a report on THE FUTURE OF EUROPEAN BANKING in which it concluded that European Union (EU) financial markets are fundamentally segmented. Much has happened since then. The euro has been firmly established in several Member States; stock markets have been through a boom and bust; and a number of Eastern European countries have joined the EU.
Perhaps most significantly of all, the European Union has launched its Financial Services Action Plan (FSAP). The goal of the FSAP is to create a single integrated market in financial services in Europe. This is regarded as critical for providing individuals with the best savings opportunities and companies witht access to 'deep and liquid markets for raising capital.' It is an extension of the principles of free trade to financial services and the same benefits associated with the elimination of barriers to trade are anticipated in financial services.
This report reviews the progress that has been made in eliminating regulatory and non-regulatory barriers to trade in banking services and the degree to which European banking markets have become integrated. It sets out some key policy recommendations that emerge from an assessment of the FSAP and suggests that the pursuit of financial integration raises fundamental questions about the ownership of banks that have not been adequately considered to date.