There are various ways of achieving a more integrated and efficient European financial market.
The establishment of area-wide integrated services for payments and financial instruments means that participants:
- are subject to a single set of rules;
- have equal and open access to the services in question; and
- are treated equally when using those services.
Integration includes standardisation, harmonisation (i.e. common rules, standards and business practices), interoperability and/or the consolidation of systems. Financial integration facilitates competition and creates economies of scale.
Financial development involves a process of financial innovation and organisational improvement which makes markets more complete, increases agents’ options when engaging in financial transactions, improves market transparency, reduces transaction costs and increases competition.
Most of the euro area’s payment and securities clearing and settlement systems were originally created to meet domestic needs. They were relatively diverse in nature and not designed to meet the needs of a single currency area. The most important needs include area-wide infrastructures based on common standards, rules and business practices in order to allow an efficient and effective flow of payments and securities at low cost.
With the introduction of TARGET in January 1999, the Eurosystem, in its operational role, provided a system enabling the euro area-wide real-time settlement of euro payments. In parallel, the private sector EURO1 system provided an alternative means of processing large-value payments in euro. These systems allowed a considerable degree of integration in the large-value payments segment.
The same cannot be said for the retail payment and securities segments, where the euro area infrastructure still suffers from fragmentation, resulting in inefficiencies and high costs, especially for cross-border transactions. The euro area’s highly complex and fragmented infrastructure prevents the area from benefiting fully from the considerable economies of scale (and scope) present in the processing of payments and securities.
The Eurosystem has a keen interest in furthering the integration of the euro area market infrastructure for payments and post-trading services for financial instruments. It does so in its complementary roles as operator, overseer and facilitator.