The result was the infamous bank-sovereign nexus that has perpetuated financial fragmentation in the euro area.14 My conclusion from this experience is as follows: the quality and comprehensiveness of integration matters. There are costs which can arise from a type of financial integration that is short-term and reversible; or from having perfect integration in one market and fragmentation in another.
A key question for the euro area is therefore: how can we generate a higher quality of financial integration for the future? Making financial integration sustainable: the role of a banking union The pre-crisis experience suggests three changes are needed. First, stronger ex ante supervision to mitigate the possible destabilising effects of financial integration.