Brussels, 30/09/2014 (Agence Europe) - The financial markets are more fragmented than during the period preceding the financial crisis of 2008, the European Banking Federation (EBF) reports.
In a report on financial integration published on Tuesday 30 September, the European organisation makes the following observation: “The share of cross-border euro area interbank loans fell from 36% at the start of 2008 to the present 25%. The cross-border loans to businesses in the euro area account for just 8% of the total, the share of cross-border border integration for household loans is below 1%. The cross-border bank holdings of debt securities issued by euro area corporates and sovereigns decreased from a level above 30% in 2006 to just 16% and the divergence in the interest rate of loans to businesses is twice as much as that observed before the crisis”.
The EBF makes several recommendations to remedy the current financial fragmentation, chief amongst them the completion of banking union. This work in progress has already helped to reduce the fragmentation of the interbank markets, the organisation stresses, even though, it explains, as it currently involves just the countries of the eurozone, it also brings with it the risk of creating a two-tier internal market. The results of the analysis of the solidity of the banking sector (AQR and “stress tests” to be carried out by the ECB and the European Banking Authority), which are expected for the second half of October, will help to restore investor confidence and could, together with banking union, be the starting point for a new wave of cross-border bank mergers. Lastly, the EBF takes the view that the ECB should phase out its substitution of the role of private banks on the interbank market. (MB)