Gertrude Tumpel-Gugerell

Last Friday, the ECB released its second annual assessment of the degree of integration of the various financial market segments within the euro zone. This report is based on financial integration indicators that the ECB publishes every six months. The ECB supports the EU’s Financial Services Action Plan by concentrating on both financial integration and modernisation of the market infrastructure. Gertrude Tumpel-Gugerell, Member of the Executive Board of the ECB, said at a conference on financial system modernisation in Berlin last week that "By ensuring that all potential market participants are subject to a single set of rules, are treated equally and have access to the same set of financial instruments, financial integration fosters competition, stimulates the creation of new instruments and markets, generates the opportunity to reap the benefits of economies of scale and scope, and thereby paves the way to financial modernisation."

Amongst the ECB’s findings were that certain markets were already integrated or well advanced. Money markets, repos, large-value payments and government bonds were well integrated and corporate bonds and credit instruments were progressing well. However, the basic security markets of bonds and equities were not yet sufficiently integrated, this despite the marked increase in cross-border securities holding within the euro zone which increased from 28% in 2002 to 45% in 2005.

Last week, the Financial Times reported that the ECB would be pressing ahead with its plans for extending the current inter-bank transactions system to cover securities settlement. Ms Tumpel-Gugerell is quoted as saying she was confident that this project would go ahead despite opposition from existing service providers in this market. "There is an widespread opinion that an integrated model, meaning a combination of cash and securities settlement, is the most efficient solution", she said.