It has long been understood that deeper financial integration would lead to a better functioning of Economic and Monetary Union.[1] And when the euro was first introduced there were encouraging signs that this integration was taking place. Price-based indicators of financial integration showed a pronounced increase, and the standard deviation of interbank lending rates across the euro area fell to close to zero.[2] Quantity-based measures of financial integration only adjusted sluggishly, as crucial parts of the banking sector, such as retail banking, remained mainly national. Financial integration proved to be ... (full story)