Why Study European Financial Systems?

1
Financial markets are the forerunners of
globalisation, so

• Why Study European Financial Systems?

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
When markets in London and New York are closed,
trading goes on in Tokyo.
Financial products such as currencies and stocks
are constantly traded in different time zones
7
Why Studying Europe?
8
Three reasons
History Diversity Specialty
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
• The euro ranks second in the league of world
  currencies behind the US dollar
• The European Central Bank is one of the worlds
  leading central banks
• The worlds largest financial centre is located
  in Europe
• Europe has become the largest financial market
  worldwide with the Internal Market Programme
• It has a unique system of regional bank
  supervision
• The centre of international financial
  supervision is located in Europe
• 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?