1 Why Study European Financial Systems? Financial markets are the forerunners of globalisation, so:

2 World Financial Centres Centres of financial activity are spread all over the world

3 Currencies are well-known and widely used and traded internationally

4 Financial Institutions have become international brand names

5 Exchanges have established (more or less successful) worldwide links and alliances

6 24-hour Trading Financial products such as currencies and stocks are constantly traded in different time zones When markets in London and New York are closed, trading goes on in Tokyo.

7 Why Studying Europe?

8 History Diversity Specialty Three reasons

9 History Many financial systems, institutions and techniques have their roots in early Europe: Products bonds shares Techniques forward trading insurance Institutions exchanges central banks but not banks; bank-like institutions existed in other regions and eras too.

10 History Studying how European financial systems evolved in time allows to develop an understanding of the reasons behind the development of financial products and trading techniques the driving forces of financial innovation the circumstances leading to the emergence of rules and institutions the determinants of the rise and fall of financial centres.

11 Diversity European financial markets offer the opportunity to study a wide range of institutions and systems to learn about financial systems by comparing financial structures and characteristics in individual countries to learn to distinguish between – bank-based and market-based systems –universal banks and specialised ones – strongly and less strictly regulated financial systems – formal and informal ways of policy interference

12 Diversity Studying European financial systems may help answering the following questions: Which alternatives do exist for building financial systems? In recent history this question was of particular relevance to late industrialising countries seeking to adjust their financial system to the needs of the economy. One example is Japan which built its financial institutions in the 19th century after careful study of western financial systems. Today this question matters especially to transition economies such as those of eastern European countries. How do financial structures, rules and institutions influence the efficiency of market outcomes? For example, this refers to debates about bank-based versus market-based systems, the advantages and disadvantages of code-law and common law countries and regulation versus self-regulation of financial institutions.

13 Specialty European financial systems are special in many respects:  EMU - the unique experiment in history Ä The euro ranks second in the league of world currencies behind the US dollar Ä The European Central Bank is one of the world’s leading central banks Ä The world’s largest financial centre is located in Europe Ä Europe has become the largest financial market worldwide with the Internal Market Programme Ä It has a unique system of regional bank supervision Ä The centre of international financial supervision is located in Europe Ä Europe has a long experience of integrating new entrance candidates into an existing framework of monetary and financial cooperation which may provide many lessons to other regions.

14 What lessons may be drawn from studying European financial systems by: Financial Institutions Customers Business firms Investors Winners and losers of financial crises International institutions NGOs Policy makers?