The European Central Bank has published its latest report on Financial integration and structure in the euro area, finding that financial integration has improved markedly since late 2022. Price-based and quantity-based indicators have risen above their historical averages, supported by lower redenomination risk premia, lower dispersion in euro area asset prices and stronger cross-border activity, which the report says has improved risk sharing and resilience. The strongest gains were in debt markets and interbank lending. Cross-border holdings of debt securities, including sovereign bonds, increased as country fundamentals improved and the Eurosystem balance sheet normalised, while more active interbank lending reflected the redistribution of excess liquidity and a less fragmented money market. The growing role of non-bank financial institutions also diversified financing channels and supported cross-border risk sharing. At the same time, the report says the financial system still falls short of supporting long-term growth, innovation and competitiveness, with external financing subdued amid high interest rates and weak investment sentiment. Equity market integration has declined since 2022, cross-border equity investment is stagnating, intra-euro area foreign direct investment has fallen to historically low levels, households continue to hold a large share of savings in low-yielding deposits, and a significant share of equity investment is channelled outside the EU. The ECB says deeper integration, scale and efficiency across the single market are needed to improve the competitiveness of the euro area's financial sector, including banking, and notes that the findings support the European Commission's savings and investments union objectives. ECB staff are scheduled to present the report at the high-level conference on European financial integration on 7 May 2026.
European Central Bank 2026-05-07
European Central Bank report finds euro area financial integration has strengthened since late 2022 but equity market integration has declined
The European Central Bank’s latest report on euro area financial integration finds marked improvement since late 2022, driven by stronger cross-border debt holdings, more active interbank lending and a growing role for non-bank financial institutions. However, subdued external financing, declining equity market integration, historically low intra-euro area FDI and high household savings in low-yield deposits mean the system still underserves long-term growth and competitiveness. The ECB calls for deeper integration, scale and efficiency across the single market, aligning with the European Commission’s savings and investments union objectives.