When we talk about euro area financial integration, we mean the extent to which financial services are available under the same rules and conditions in all countries that use the euro.

In a well-integrated financial system, assets with the same risk-return characteristics cost the same, irrespective of the country in which they are traded. Financial integration therefore contributes to the uniform transmission of the European Central Bank’s (ECB) monetary policy across the euro area.

This is the third edition of the European Central Bank’s biennial report on financial integration and structure in the euro area (FISEA). As explained in greater detail when the first edition was released in March 2020,^[1] it is designed to focus on structural developments in the financial system of the euro area and, in some cases, of the European Union (EU), as well as on related policy issues. In so doing, it covers developments in financial integration across member countries, changes in financial structure (the mixture of financial markets and intermediaries) and financial development or modernisation (for example through innovations in the financial system). Definitions of these three concepts and how they link to Eurosystem tasks and functions were provided in more detail in the 2020 preface.

The findings of this report concern issues relevant for the policy discussion related to the European banking union, the European capital markets union and thus the financial aspects of deepening Economic and Monetary Union.

The report has two main sections.

The first section reviews changes to the environment and the context in which the euro area economy financial landscape is evolving. It also identifies policy priorities in the light of ongoing policy debates.

The second section provides analytical material, with a focus on the main trends in financial integration, structure and development, based on a review of the standard set of ECB indicators of financial integration and structure. The indicators and their descriptions are included in an online Statistical Annex (SA).^[2]

The report also includes boxes that examine the following eight topics in greater depth.

• Massive investment is needed to meet EU green and digital transition targets
• The derivatives clearing landscape in the euro area three years after Brexit
• Reassessing euro area financial integration: the role of financial centres
• Home bias and repo rates
• Intra-euro area cross-border bank lending: a boost to banking market integration?
• Do EU SURE and Next Generation EU (NGEU) bonds contribute to financial integration?
• Examining the causes and consequences of the recent listing gap between the United States and Europe
• Rapid growth and strategic location: Analysing the rise of FinTechs in the EU