Most incoming banks have indicated Germany, Ireland, the Netherlands or France as their new main location in the euro area. This pattern also seems to apply to the relocation of activities beyond banking. Public statements and market intelligence suggest that a sizeable fraction of asset management firms and insurance companies that are relocating activities from the United Kingdom as a result of Brexit have moved to either Ireland or Luxembourg. And speaking here in Amsterdam, I should note that the Netherlands is attracting a substantial amount of trading platforms, exchanges and fintech companies. The persistence of such dynamics, and the emergence of a clearly multi-centric euro area financial system, could raise a number of challenges. In particular, without further progress on banking and capital markets union, a more fragmented financial structure could affect the ability of investors and companies from a country experiencing a negative shock to access investment and funding opportunities in unaffected countries (private risk-sharing). It could also create regulatory and supervisory challenges: domestic capital markets within the EU are currently subject to national rules and supervision; the differences in regimes could further inhibit the integration of markets and perhaps incentivise regulatory arbitrage. Brexit and the need for renewed momentum on the capital markets union and banking union Indeed, from a global standpoint, European capital markets are too small and fragmented. The goal of the capital markets union (or CMU) is to develop an ecosystem that will allow the development of strong European financial markets and intermediaries which are able to compete internationally.

The fact that in previously cycles this did not happen is good news, but a series of good output numbers in the US, a few higher‐than‐expected inflation prints, or a change in the strategy on how to manage the balance sheet of the Fed could, trigger a significant increase in long term rates. 7 BIS‐based Real Exchange Rates; for Argentina, Brazil, Chile, Colombia, México, Perú and Venezuela. 3  The current trajectory of the Dollar/Commodities/Credit Spreads provide mix evidence  Other dimensions suggest we are somewhat in between the 1994 and 2004 episodes.  The dollar has strengthened in multilateral terms in the last quarters, similarly to what was seen in 1994. Commodities have shown a mild upward trend. Definitely smoother than their trend in 2004, but also markedly more bullish than in 1994. Finally, EMBI spreads have decreased in tandem to what they did in 2004. Indeed, capital inflows have returned massively to the region in the last few months. In other words, while commodities are not as supportive of emerging economies as they were in the previous decade, markets are showing a high appetite for emerging market debt.  This suggests two things. On the one hand, there is room for a recovery in emerging economies, and markets are pricing that in. But on the other hand, this recovery will not be supported by a commodity cycle as we experienced in the 2000s, so the region is more exposed to financial shocks coming from a disorderly normalization of monetary policy in the United States.