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Creating and Governing an Integrated Market for Retail Banking Services in Europe

A Conceptual-Empirical Study of the Role of Regulation in Promoting a Single Euro Payments Area

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Matthäus Markus Sielecki

The creation of the Economic and Monetary Union (EMU) has accelerated the harmonization process of regulation and governance in Europe. However, the integration of fragmented retail banking markets still represents a difficult task for regulators. This book investigates the role of EU policy in creating a single market, addressing explicitly questions on the choice of policy measures to overcome barriers to integration persistent in these markets. Based on an analysis of different regulatory theories, the author develops a conceptual framework and illustrates its applicability to the case of the Single Euro Payments Area (SEPA) initiative. The fact that a single market has not yet evolved is less a sign of market or coordination failures than of government failures. The author concludes that, despite the political resistance from national interest groups, regulatory barriers need to be removed first to provide a level playing field for banks and a safe legal environment for consumers.

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List of figures XV

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XV List of figures Figure 1: Classification of bank types ................................................................... 8 Figure 2: Structure of work ................................................................................. 25 Figure 3: Overview of theoretical framework ..................................................... 29 Figure 4: Neo-classical economics and the New Institutional Economics ......... 30 Figure 5: Framework for agency problems in the banking sector ...................... 39 Figure 6: Theoretical concepts of European integration ..................................... 58 Figure 7: Social costs and benefits of regulation ................................................ 74 Figure 8: Overview of conceptual model ............................................................ 97 Figure 9: Consumers’ actual and intended purchases of financial products ..... 101 Figure 10: Analysis process steps of proposed conceptual model .................... 131 Figure 11: Illustrative application: retail payment market regulation .............. 136 Figure 12: Simple model of cashless payment arrangements ........................... 138 Figure 13: Classification of payment types in the eurozone (status 2001) ....... 141 Figure 14: Payment processing system availability in Europe in 2001 ............ 144 Figure 15: Overview of ACH systems in Europe (2002).................................. 168 Figure 16: Sources of fees for core banking services in the eurozone .............. 173 Figure 17: EU payments profit breakdown by product ..................................... 175 Figure 18: Use of cashless payments instruments in selected EU countries .... 178 Figure 19: Offsetting SEPA investments by volume growth and efficiency .... 196 Figure 20: The SEPA timeline .......................................................................... 213 Figure 21: Non-cash payment volumes per instrument (2000-2008) ............... 221 Figure 22: ACH market structure in Europe (2001 vs. 2007) ........................... 232 Figure 23: Schematic evolution of payment standard’s market share .............. 239 XVI Figure 24: Non-cash payment instrument mix per country .............................. 246 Figure 25: Consumer price index for financial services in the eurozone ......... 249 Figure 26: Consumer price index for...

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