The process of defragmentation As a first encouraging step forward in the climb out of the crisis, we see that fragmentation of financial markets in the euro area has come down significantly since its climax in the early summer of 2012.
Deposits have grown, capital inflows have taken place, the claims on the Eurosystem by banks continue to go down and TARGET2 balances have declined. Euro redenomination risks have been taken off the table.1 Euro area banks – also those in non-core countries and smaller institutions – have reported to the ECB a continuing improvement across funding categories in the third quarter of 2013.