European Financial Market Integration: Evidence on the Emergence of a Single Eurozone Retail Banking Market

This study provides new evidence on the emergence of a single Eurozone retail banking market. Applying cointegration methodology, the empirical results indicate only limited evidence for integration before January 1, 1999. The introduction of the Euro manifests itself in structural breaks after which evidence for an emerging uniform Eurozone banking market is increasing. After investigating the interest pass-through we conclude that the single currency has the potential to "complete" the single market, however, not so much in the sense of cross-border arbitrage, but by means of a smooth and uniform pass-through process in the presence of a single monetary policy.