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Two items were firmly on the European economic agenda in the 1990s: financial market integration and the creation of a common or single currency. The former was supposed to have been achieved in 1992 (via the Single Market Act, with some derogations), and the latter came into being on January 1, 1999. This study is concerned with a particular connection between the two themes, namely the process of financial intermediation and especially the role of banking. 1.1 Financial & Monetary Integration in Europe Up until the mid-1980s, European financial intermediation was, as else where 'on shore' in the post-war period, broadly characterised by a relatively high degree of diverse regulatory control and with cross-border restrictions (e.g., in the form of exchange controls). This resulted in the administration of interest rates and pegging of prime market yields, as well as restrictions on intermediary specialisation. Hence, it was easy to understand why price c ,etition was hardly ever seen. Within this kind of environment, banks and other financial intermediaries (OFIs) competed mainly on non-price terms - for example, through the expansion of branch networks. The Single Market Programme (SMP),l launched in 1986, was in a com plex way intended to level out and open up the domestic markets of the European Union (EU) to competition from entities in other Member States.
Sommario
1 Introduction.- 1.1 Financial and Monetary Integration in Europe.- 1.2 Synopsis.- 1.3 Collaborative Research.- 2 Banking under EU Integration.- 2.1 Introduction.- 2.2 The Single Market Programme and EU Banking.- 2.3 Assessing the Impact of Integration on EU Banking.- 2.4 Bank Pricing under Integration.- 2.5 Bank Strategies under Integration.- 2.6 Concluding Remarks.- 3 Theoretical Foundations of Financial Intermediation.- 3.1 The Nature of Financial Intermediation.- 3.2 Connecting the Financial System with the Economy.- 3.3 Modern Theory of Finance and the Problem of Banking.- 3.4 So What Do Banks Do?.- 3.5 Analysing the Bank Balance Sheet.- 3.6 Regulation in Banking.- 3.7 Concluding Remarks.- 4 The Analysis of Competition and Applications to Banking.- 4.1 Introduction.- 4.2 Competition Theory and Applications to Banking.- 4.3 Double Competition in Banking.- 4.4 Problems in the Analysis of Competition in Banking.- 4.5 Concluding Remarks.- 5 Contributions to the Theory of Banking Competition.- 5.1 Introduction.- 5.2 Balance Sheet Segmentation.- 5.3 Regulation of Bank Capital and Balance Sheets.- 5.4 Strategies in Banking Competition.- 5.5 Influences on Bank Pricing.- 5.6 Concluding Remarks.- 6 European Banking Responses to Yield Curve Impulses.- 6.1 Introduction.- 6.2 Connections Between Term Structure and Banking.- 6.3 Banking System Sensitivity to Monetary Policy.- 6.4 Empirical Evidence.- 6.5 Results: Tables and Simulations.- 6.6 Analysis of Results.- 6.7 Concluding Remarks.- 6.8 Appendix: Term Structure as Information About the Economy.- 7 Reflections.- 7.1 Contributors to Financial Economics.- 7.2 Monetary Integration: The View from Banking.- 8 Bibliography.
Riassunto
Two items were firmly on the European economic agenda in the 1990s: financial market integration and the creation of a common or single currency. The former was supposed to have been achieved in 1992 (via the Single Market Act, with some derogations), and the latter came into being on January 1, 1999. This study is concerned with a particular connection between the two themes, namely the process of financial intermediation and especially the role of banking. 1.1 Financial & Monetary Integration in Europe Up until the mid-1980s, European financial intermediation was, as else where 'on shore' in the post-war period, broadly characterised by a relatively high degree of diverse regulatory control and with cross-border restrictions (e.g., in the form of exchange controls). This resulted in the administration of interest rates and pegging of prime market yields, as well as restrictions on intermediary specialisation. Hence, it was easy to understand why price c ,etition was hardly ever seen. Within this kind of environment, banks and other financial intermediaries (OFIs) competed mainly on non-price terms - for example, through the expansion of branch networks. The Single Market Programme (SMP),l launched in 1986, was in a com plex way intended to level out and open up the domestic markets of the European Union (EU) to competition from entities in other Member States.
