Brussels, 28/04/2014 (Agence Europe) - In their annual report on financial integration published on Monday 28 April, the European Commission and the European Central Bank (ECB) note “substantial” fragmentation of the financial markets in Europe, despite “considerable” improvements in recent years.
Markets at both eurozone and EU28 level are “more fragmented at the economic and financial level compared with the pre-crisis period”, state the two European institutions in a joint press release. They say there is room for promoting increased integration in company securities, bonds and banking.
Several indicators illustrate the fragmentation of the money markets. Although 60% of debt held by eurozone banks was from different countries in 2008, this fell to 40% in 2012, although it has since stabilised.
Banks at the heart of the eurozone (Germany, Austria, Finland, France, Luxembourg and the Netherlands) have benefited since the start of the financial crisis from the strength of their country of registration when it comes to short-term refinancing, an advantage denied banks in “peripheral” nations like Belgium, Cyprus, Spain, Italy, Portugal, Slovenia and Slovakia). In addition, the average maturity of securities issued by the banks has shrunk throughout the eurozone. It is now lower in peripheral countries, falling from 7 years in 2008 to 3 years in 2014, than in core countries, where it has fallen from five years to four.
Banking union. The report notes the importance of banking union for restoring confidence in the eurozone's 6,000 banks and tackling market fragmentation. Banking union comprises the bank supervision mechanism (SSM) and the bank resolution mechanism (SRM) (see EUROPE 11061).
The report stresses the ECB's role as lender of last resort for the banking sector. The ECB says that capital injections into the economy totalled €1.7 trillion in 2012, but fell to €1 trillion at the end of 2013.
European Union countries have made a huge contribution to ensuring the stability of the financial sector. From 2008 to 2012, public capital injections into banks in the EU reached €413.2 billion, exceeding €60 billion in Germany, Spain, Ireland and the United Kingdom, and representing 10% of GDP in Cyprus and 15% in Greece and Ireland. (MB)