European Capital Markets with a Single Currency

By Jean Dermine; Pierre Hillion | Go to book overview

own instead of relying on bank loans. These economies of scale might also appear in other parts of the market and should in general favour large organized markets. One of the initial consequences of EMU might therefore be an increasing dichotomy between (mainly national) retail markets and a more and more unified wholesale market whose sheer size favours securitization and hence large organized exchanges.

At the wholesale level the reasons why some national idiosyncrasies are likely to persist are more subtle. The legal environment will continue to be different. A repo agreement in one member country might still have some different legal aspects from a similar agreement in another member country. Regulation of primary dealers is still subject to different national criteria. An additional reason, which is not always recognized, is that the common monetary policy might not be totally uniform. The reason for this lies in the federal organization of the ESCB, which leaves some room for differentiation by the national central banks which will continue to exist. A clear understanding of the structure and functioning of the ESCB is therefore required.


References

Arrowsmith, John ( 1996), "'Economic, Financial and Legal Aspects of the Transition to a Single European Currency"', written evidence to the Treasury Committee of the House of Commons, UK (January).

Begg, David, Francesco Giavazzi, Jürgen von Hagen and Charles Wyplosz ( 1997), EMU--Getting the End-Game Right, Monitoring European Integration no. 7, London: Centre for Economic Policy Research (February).

Bishop, Graham ( 1990), "'Separating Fiscal from Monetary Sovereignty in EMU--A United States of Europe Is not Necessary'", London: Salomon Brothers (November).

Dermine, Jean ( 1996), "'European Banking with a Single Currency'", mimeo, INSEAD (March).

European Commission ( 1997), "'The Impact of the Introduction of the Euro on Capital Markets'" (July).

European Monetary Institute ( 1996), "'First Progress Report on the TARGET Project"', Working Group on EU Payment Systems (August).

European Monetary Institute ( 1997), "'The Single Monetary Policy in Stage III of EMU-- Specification of the Operational Framework'" (January).

European Mortgage Federation ( 1997), 'Mortgage Credit in the EU in 1996'.

Folkerts-Landau, David and Peter Garber ( 1992), "'The ECB: A Bank or a Monetary Policy Rule?'", in M. Canzoneri, V. Grilli and R Masson (eds.), Establishing a Central Bank: Issues in Europe and Lessons from the US, Cambridge: Cambridge University Press.

Folkerts-Landau, David, Peter Garber and Dirk Schoenmaker ( 1996), "'The Reform of Wholesale Payment Systems and Its Impact on Financial Markets'", Group of Thirty, Occasional Paper no. 51.

Gantner, Anita ( 1997), "'Will the Ecofin Be Credible'", CEPS Review, 4.

Goodhart, Charles and Dirk Schoenmaker ( 1995), "'Should the Functions of Monetary Policy and Banking Supervision Be Separated'", Oxford Economic Papers, 47: 539-60.

Goodhart, Charleset al. ( 1997), "'Financial Regulation: Why, How and Where Now?'" Monograph for the Central Bank Governors Meeting, Bank of England (June).

-74-

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