As a rough measure of the fragmentation of bank funding markets across the euro area, Target2 balances have declined by about € billion since their peak in mid-2012. To give but one example, the Target2 balance of the Banco de España has declined by about one-quarter since August 2012.
On the lending side, the dispersion of lending rates to non-financial corporations (NFCs) also declined, but by considerably less than the dispersion of monetary financial institutions’ (MFI) funding rates. For example, the median absolute deviation of NFC lending rates has fallen from 5.6% in the first seven months of 2012 to 4.4% since then. This provides ample evidence of receding financial fragmentation.