- area companies have traditionally relied much less on debt raised in financial markets than have their anglo - saxon counterparts. financial intermediaries play a much more important role in the euro - area than in anglo - saxon financial systems. finally, equity markets remain fragmented despite several mergers between exchanges, the increased use of electronic trading and higher positive correlations between share price movements across exchanges. the current, bearish climate in equity markets appears to be delaying further integration through the creation of integrated networks which can facilitate cross - border trading. the introduction of the euro is also providing new impetus to competition between financial institutions. wholesale banking markets have been integrated for some time now, but retail markets remain fragmented. banks have tended to concentrate on domestic consolidation and have expanded crossborder by signing agreements with banks in other countries so as to facilitate the supply of services to their largely domestic customers. since some eu financial markets remain fragmented despite the benefits of financial integration, let me now turn to actions that can be taken to create an integrated eu financial market. in this regard, what is the role of public policy? in my view, there are two major areas where public policy action can contribute to more - effective financial integration. the first relates to the need to remove remaining legal or regulatory barriers. the second involves responding appropriately to the new challenges raised by a more financially - integrated environment. regarding the need to remove existing barriers, the need of action in this area has been recognised at the highest political level. successive european councils have declared the integration of eu financial markets as a high priority of economic reform in the eu. this priority is reflected in a coherent policy strategy at the eu level and in the urgency which has been attributed to its implementation. the issue is being addressed mainly within the context of the commission ’ s risk capital action plan ( rcap ) and the financial services action plan ( fsap ). the rcap focuses on improving the provision of finance to new enterprises, often working in high technology, high risk areas. these firms often cite a lack of external finance as a major impediment to their expansion. given the dynamism they provide to an economy, measures to alleviate the shortage of finance are crucial in meeting the wider goals of the eu member states, namely increasing employment, productivity and growth. at the cardiff european council in june 1998, financial services were given a high profile and the european commission was asked to prepare a framework for action. the result was the financial services action plan, a package of

. a number of the measures in the fsap address issues such as liquidation of financial institutions, the capital adequacy of banks and the question of how to deal with financial conglomerates. the eu has long been involved in strengthening cross - border cooperation among the member states in the area of supervision. the first two brouwer reports, published in 2000 and 2001, examined supervisory procedures in some detail. in the second report, emphasis was placed on the need to coordinate supervision across sectors ( banking, insurance, securities ) in the face of the creation of large financial conglomerates. a third brouwer report was published in september of this year which, inter alia, suggested recommendations for the procedures by which community regulation is agreed, drawn up and adopted in an attempt to speed the presently rather cumbersome process. financial markets cannot function properly cross - border without a co - ordinated regulation and supervision for banking, insurance and securities markets as well as across these markets. the current set of committees is structured by sector and includes committees for discussion, advisory committees and committees with regulatory powers. following the introduction of the lamfalussy decision - making process in the securities markets, the current structure of committees came under scrutiny. in this connection, the lamfalussy process, which was originally designed to establish a unified regulatory and supervisory framework for the securities ’ sector, is to be extended to cover banks, insurance companies, and financial conglomerates. this framework will lead to closer coordination of supervisory practices. in conclusion, i think it fair to say that european financial integration has come a long way. yet, the process is far from complete. eu financial integration is one of the cornerstones of the effort to boost the dynamism of the european economy. a more efficient and integrated eu financial system will increase the availability of capital and increase the productivity of capital, with positive knock - on effects on output growth and employment creation.