An integrated money market exists for liquidity transfers in euro; banks are inter-connected in a common payment system infrastructure; and wholesale securities market activities and corporate finance services do not recognise geographical borders. However, at the retail level, international banks must still treat each country as an individual market. This is because of localised demand and country-specific banking products, and differences in conduct-of-business and consumer protection rules. The remaining differences in regulatory and supervisory practices can also play a role. I believe that few institutions understand this as well as you do, as you still have to cope with the task of navigating business through various national environments. I should like to explore this double feature of euro area banking today. On one hand, there is the challenge for central banks and supervisory authorities to respond to the emergence of a common wholesale banking system in order to maintain financial stability. On the other hand, greater integration, also in the retail field, remains an important policy objective. I should like to address the two aspects in turn, starting with wholesale banking and then moving on to the retail side. A common wholesale banking system I share the view that a common currency and a common central bank actually determine a unified banking system. In a nutshell, access to a common source of central bank liquidity and a common money market – as well as confidence in the common currency – create strong interconnections between all banks operating in the single currency area.

Payment flows in these systems again indicate a significant increase in cross-border interbank trading after the introduction of the euro. In terms of value, cross-border transactions currently account for 40% of all kinds of TARGET payments, for instance. The degree of integration is certainly lower for securities settlement, even though a process of consolidation has been taking place. Third, the degree of integration of securities market activities is usually misjudged, since attention is focused on the costs and difficulties of individual investors when investing abroad. The picture is completely different for wholesale activities. The corporate finance markets for major customers are actually already quite highly integrated. To give an example, the share of domestic book-runners for bonds issued by euro area companies dropped from over 80% in 1995 to 36% in 2000. As in many other securities and derivative market activities, the market structure relies on large European or global financial groups. The same trend towards a high level of integration also holds true of wholesale asset management, with investments being increasingly diversified across borders. In terms of volume, growth has been very impressive in the euro-denominated securities markets, until the very recent slowdown and increased market uncertainty after the tragic events in the United States. The deepening of the markets has been particularly strong for bonds – euro-denominated bonds issued by private entities doubled during 1999, and market activity remained quite strong until the summer of this year.