bank may mean that there is less price pressure on certain products than would otherwise be the case. however, regulations and tax legislation may also have the effect of subduing competition. one area that is worth particular attention is saving in funds. although competition appears to be good for new savings, there is a considerable deadlock effect resulting from regulations on capital gains tax. this helps dampen competitive pressure. one area that is still an object for old - fashioned, national limitations is cross - border payments. despite electronic systems and the fact that the eu is supposed to comprise a single market, substantial costs are involved in transferring payments between banks in the different countries. this applies if one compares with other profit - making banks. the non profit - making banks, for instance, co - operative banks, which are common in germany and france, have even lower profit margins. the margins are calculated as the difference between the interest rate offered to consumers and the interest the bank receives if they invest the money without risk, e. g. in treasury bonds. the eu and emu eu membership is one of the structural factors that are assumed to have increased competition in recent years. the idea in creating the eu's common market was to abolish the legal and administrative impediments to trade and thereby increase competition between and within the member states of the eu. this, together with better usage of economies of scale, would cause price levels to converge. it is now 9 years since the common market came into force and we can conclude that the price differences between the member states still remain. there are also considerable differences between the usa and the eu with regard to price spread. almost one - third of all brands has a price spread of between 60 and 100 per cent within the eu. the corresponding figure in the usa is 9 per cent. one reason for this is that even if the legal trade impediments have been largely removed, there still remain a significant number of non - tariff trade barriers in the form of, for instance, various standards that segment the national markets. transport costs and differences in consumer preferences are also factors that counteract market integration. a clear sign of market segmentation is that the price differences between the countries are significantly larger than within the countries. the eu / eea countries trade almost 90 per cent with one another. internal trade is therefore approximately as important or more extensive here than it is in the usa. the fact that the european market is much more segmented than the north

of around eur 23 billion euro banknotes was shipped abroad via the banking system. in the mid - 1990s, the bundesbank estimated the deutsche mark banknotes circulating outside germany to be worth between eur 32 and 45 billion. if this is taken as a rough approximation of the amount of legacy currency banknotes held outside the euro area, then the available evidence suggests that a considerable part of this has already been converted into euro banknotes. let's now consider euro - denominated bank deposits. they also played an important part in the cash changeover outside the euro area. indeed, before the cash changeover, several non - euro area countries encouraged households to deposit their legacy currency cash holdings in euro - denominated accounts, rather than exchange them directly for euro banknotes. credit institutions, particularly foreign - owned banks, widely advertised euro - denominated accounts at attractive conditions. this strategy was intended to reduce both the logistical and transaction costs related to changeover operations. in some cases, especially in south - east europe, another objective was to boost confidence in banking systems. in co - operation with a number of central banks in countries neighbouring the euro area, the ecb has gathered data on the scale of these developments. overall, in around 30 countries, euro - denominated deposits increased by a total of more than eur 13 billion in 2001. information for the first months of 2002 suggests that this may be a lasting phenomenon as euro - denominated deposits decreased only slightly. in a nutshell, the available evidence tends to indicate that most of the legacy currency banknotes have been converted into euro, either in cash or deposit form. this suggests that the euro has successfully replaced the legacy currencies in the regions neighbouring the eu. let me add that – despite the considerable amount of euro banknotes transferred abroad – foreign circulation of euro banknotes only constitutes a limited proportion of the total currency in circulation. the estimated amount of euro banknotes circulating outside the euro area at the end of june accounts for only 8 % of total currency in circulation and only 0. 4 % of the monetary aggregate m3. therefore, while the ecb monitors these developments closely, they currently play no significant role in the assessment of monetary developments in the euro area with regard to price developments. demand for euro banknotes over the longer term let me also take a somewhat longer - term perspective with regard to the demand for the euro in the euro area and outside. as already mentioned, a preliminary