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The following OECD assessment and recommendations summarise chapter 2 of the Economic Survey of the Euro Area published on 14 January 2009.
Financial innovation and enhanced market integration have increased competitive pressures and facilitated financial deepening. But more needs to be done to foster integration, especially in mortgage markets.
Considerable progress has been made in integrating and deepening European financial markets during the first decade of monetary union, including the cross-border consolidation of financial companies and infrastructures. The introduction of the euro has created broader and deeper capital markets for debt securities and equity financing, and new policies have helped to bring down barriers to the provision of financial services across borders and create new common payments infrastructures. Financial innovation and enhanced market integration have increased competitive pressures and facilitated financial deepening. The assets and liabilities of households, businesses and financial institutions have risen markedly relative to incomes and output, and the geographical distribution of assets has become more dispersed. But, impediments to cross-border provision of financial services remain, especially in mortgage markets, and policy should do more to foster integration, for instance, by improving the access of foreign institutions to national credit and land registries and harmonising the cost and duration of foreclosure procedures. Supervisory and regulatory practices will have to keep pace with deeper cross-border integration.
Financial integration and innovation may be changing monetary policy transmission mechanisms.
Financial market growth and financial innovation have widened the range of financing and investment opportunities available to households and companies. Ultimately, such changes should be beneficial for growth prospects. The changes will also affect the speed and extent to which monetary policy decisions are transmitted to the euro area economy. Some channels of policy transmission have strengthened over the past decade and new channels have appeared, while others may have become weaker. Greater opportunities for risk-taking are likely to exacerbate potential non-linearities in the transmission of policy, with policy-induced changes in asset and collateral values also affecting risk perceptions and risk tolerance. The overall balance of such changes is difficult to evaluate, given the comparatively short time period for which data are available, but the analytical work of the Eurosystem Monetary Transmission Network should be revisited and updated.
How to obtain this publication
The complete edition of the Economic survey of the Euro Area 2009 is available from:
The Policy Brief (pdf format) can be downloaded in English. It contains the OECD assessment and recommendations.
For further information please contact the Euro Area Desk at the OECD Economics Department at firstname.lastname@example.org.
The OECD Secretariat's report was prepared by Nigel Pain, Jeremy Lawson, Sebastian Barnes and Marte Sollie under the supervision of Peter Hoeller. Research assistance was provided by Isabelle Duong.