Integration of European Banking and Financial Markets (download PDF 217 Kb)

David Marques Ibanez and Phil Molyneux

Abstract
This paper investigates banking and capital market developments in Europe and the moves towards the creation of a single financial services market. A critical element in the integration process is the success of the EU's Financial Services Action Plan (FSAP). This seeks to introduce a wide range of legislation aimed at reducing barriers and promoting cross-border trade in financial services - especially for capital markets and retail / SME financial service areas. As was the case in 1992, it is likely that the expectation of further financial market integration will encourage market participants to adjust their strategies in the light of these developments. Or to put it another way, many banks are likely to accelerate their plans to sell financial products cross-border given the changing environment. Stock and derivative markets will be encouraged to consolidate and investment and pension funds in the Euro zone will increasingly embrace the equity market culture and so on. Regulatory standards in the financial sector will move in line with international best practise and further harmonisation will take place. The challenge for the financial services industry is to reorganise and adapt to this new environment. Targeting a successful pan-European strategy post-2005 (the deadline for the FSAP) will be of critical importance for financial services firms in general.