Banking and finance in Europe : dawning of the EMU

Abstract

BANKS IN THE European Union (EU) dominate the world in terms of total assets and total capital of the world's top 1,000 banks (The Banker, July 1997b). The EU with its 15 member states forms a 550 million market in terms of population (Robinson, 1998). The Economic and Monetary Union (EMU) was formed to consolidate the monetary policies of the member states in constructing a single monetary policy and implementing a single currency called the "euro". Thus, there will be a single market for purposes of trade and investment, and a single currency for transacting business. The banking and financial sector is one of the most important sectors among the EU's member states. With the pending introduction of a single market and currency on 1 January, 1999, it is important to assess the impact that this will have on the banking and finance industry, and how the industry is adapting for the change. The European banks already have started to reflect their assets in euros. The European Investment Bank (EIB) and Italy launched euro-denominated bonds in 1997 (Euromoney, April 1997) and many have followed suit since then.