In recent years, there has been a visible acceleration in the development and integration of EU financial markets. In what follows, I will discuss, first, why financial integration is desirable, second, why it has occurred, third, trends toward financial integration in the EU, and fourth, the role of public policy in supporting integration. Why is financial integration desirable?
I think it fair to say that the main function of the financial system is to serve the needs of the real economy, encouraging productive investments, allowing risks to be diversified, mobilising savings, monitoring firms’ use of funds, etc. To this end, the development of both markets and sound financial institutions plays a key role.