European Financial Market Integration And Development Research

The paper analyzes the structural changes that happened in Europe's financial markets since the introduction of euro. In some financial market segments, reduction of barriers to cross-border transactions promotes the deepening process. Pan-European inter-bank money markets and corporate bond markets that facilitate distribution of liquidity inside and outside euro area and corporate financing process have emerged. To make use of opportunities for better tradeoff between risk and benefit, asset managers have implemented pan-European portfolio strategies. The enterprises in Europe also finance in bond markets and equity markets at an unprecedented rate, which shows that the significance of bank loans as the major financing approach in Europe is declining.However, in different financial market segments, the progress of integration and development varies significantly. The financial market segments with more flexible or harmonized infrastructure develop quickly and expand into the whole euro area, with gains in liquidity and depth. The financial markets with strong national idiosyncrasies have not undergone such transformation. The development of pan-European secured money markets is frustrated by heterogeneous market practices grown out of different history, law and fiscal framework. The inertia of local practices and rules and heterogeneity of regulation systems in various countries are the major force delaying the emergence of pan-European trading platform.Technical barriers related to infrastructure are easy to overcome and solve, but clearing of institutional barriers is a more complicated and hard process.