March 29, 2007	Thursday	Rabi-ul-Awwal 9, 1428

FRANKFURT, March 28: The European Central Bank said on Wednesday that the introduction of euro had led to an increased degree of financial integration in the single currency area, but that further integration was needed in areas, such as retail banking.

In its first annual report on financial integration in Europe, the ECB said financial integration “increases the efficiency of the financial system and helps promote its development, thereby raising the potential for stronger non-inflationary economic growth” in the region.

And the launch of the euro had provided a “major boost” to areas, such as the corporate bond market where a high degree of integration had been achieved, the ECB wrote.

“Progress has also been made in the integration of euro area equity markets, where equity returns are increasingly determined by specific factors that are common to euro area countries,” the report stated.

“The euro area securities infrastructure underpinning both bond and equity markets is not yet sufficiently integrated,” it said.

And turning to the banking sector, “while interbank (or wholesale banking) and capital market-related activities show signs of increasing integration, retail banking markets continue to be less integrated,” the ECB said.

“The low level of retail banking integration is associated with a relatively high level of fragmentation in retail payment infrastructures,” the report said.

“Unlike large-value payments, procedures, instruments and services offered to customers in the field of retail payments have not yet been harmonised.” it said.

“The situation in the retail payment infrastructures today does not differ substantially from the time before EMU (European Monetary Union).

The current retail payment systems are still tailored to the individual circumstances of the respective national markets.” In Brussels on Tuesday, EU finance ministers unanimously backed plans to create a single European retail payments market to drive down costs to consumers through tougher competition.

Thanks to an industry initiative, know as the Single Euro Payment Area (SEPA), individuals and companies will be able to make payments across national borders by credit or debit card or electronic transfer just as cheaply as within single states.—AFP