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The unsecured money market has been fully integrated since the introduction of the euro. The repo market is also highly integrated. The integration of the large-value payment systems has been instrumental in achieving this result.
Government bond markets became considerably integrated in the run-up to the EMU and integration has now reached an advanced stage with bond yields converging in all countries and being increasingly driven by common factors. The corporate bond market received a major boost by the introduction of the euro and has achieved a high degree of integration. The development of new synthetic credit risk transfer instruments has contributed to the completeness and integration of credit and bond markets.
Progress has also been made in the integration of euro-area equity markets, where equity returns are increasingly determined by common specific factors. The euro area securities infrastructure underpinning both bond and equity markets is however not yet sufficiently integrated.
With regard to the euro area banking markets, interbank and capital market-related activities could be considered as fairly integrated, but further progress could still be warranted. At the same time the retail banking components continue to be fragmented. This lack of integration in retail banking markets is also apparent from the differences in the provision of retail payments services as also shown by the fragmented underlying infrastructure.
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