Financial systems in general serve not only to channel funds from those who have a surplus to those who have a shortage of savings, but they also serve to trade, hedge, diversify and pool risk. These functions help us to understand the economic benefits that can be derived from financial integration.
There are two widely accepted economic benefits of financial integration: first, the better sharing and diversification of risk; and second, the increase of the potential for higher economic growth. Let me explain this in more detail. First, the better diversification and sharing of risk brought about by financial integration helps to fulfil the conditions for the optimality of a currency area.