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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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A Introduction 1

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. Research problem and relevance 1.1 Financial market integration and economic develop- ment in Europe “This policy [for a supranational union], which is far removed from all emotional- ism and passions, does not require us to forget the past or be careless about the fu- ture. It must be and must always be based on both reason and on experience.” Robert Schuman, 16th May 1949, at the Festival Hall in Strasbourg. To answer the question on the driving force for an integrated market in Europe, it is worth recalling that this endeavor has always been politically motivated. Known as one of the fathers of modern Europe, Jean Monnet (1943) advocated the formation of the United States of Europe as a guarantee of prosperity and social development. However, the means have always been of an economic na- ture. The Treaty of Rome constituted the creation of a unified economic area with a common market as the mission of the Community (European Communi- ty, 1957). Therefore, the pursuit of a single European banking market could be understood as a fundamental part of the European integration project, motivated by benefits for the financial sector as well as for firms and consumers. Since the late 1990s, the European Union (EU) has been working specifical- ly towards creating a single European market for financial services. Despite the substantial progress that has been made, it is still far from being complete. Ma- jor steps have been accomplished in particular with the implementation of vari- ous measures of...

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