Lydian Payments Journal - PYMNTS.com

Portugal 24.3
Finland 8.5
Eurozone 12.4
Source: European Commission (2004)
With Luxembourg as an exception, the countries all had a market share of 25% or less of foreign banks or
other credit institutions. For the Euro Zone as a whole, foreign banks on average had a market share of less
than 15%. This low average mainly reflects the very low market shares of foreign banks in the largest Euro
Zone countries (Germany, France, Italy, and Spain) which were typically less than 10%. This lack of
integration of the banking sector contrasted greatly with other sectors of the economy. 4
Although EU regulation has become evermore effective, the presence of foreign banks has not grown
remarkably in most (old) EU countries. Also, many EU countries already have a high concentration of banks
(for example, Sweden, Belgium, and Portugal), with apparent additional growth from 2002 until recently.
Furthermore, apart from a small but growing number of notable exceptions, M&A activity largely takes
place within national boundaries. An early example to the contrary was the Swedish/Finnish Merita
Nordbanken merger of 1998.
Euro Payment Infrastructure Development
Another item not covered by the introduction of the Euro was the EU payment infrastructure. Parallel to
the introduction of the Euro, regulation was implemented to liberalize, deregulate, and harmonize financial
markets and institutions with the aim of cutting the costs of cross‐border payments. In the past, cash flows
between European countries were obstructed by high transfer payments by banks. 5 With intra‐EU cash
transactions, often both the payer and the receiver were charged. Maybe almost as bad, there were
administrative burdens as well.
In a discussion paper 6 published in 1990, the then European Commission made it clear that establishing an
equitable payment infrastructure within Europe was critical to the success of its overall goal: “The prospect
of economic and monetary union which will lead to a further increase in intra­community trade makes it all
the more urgent to ensure that Europe is equipped with structures which provide as cheap, as rapid and as
reliable a payments service between different Member States of the Community as already exists within them.”
4 P. De Grauwe. Economics of Monetary Union. (Oxford: Oxford University Press, 2005).
5 H. Von Eije. and W. Westerman, “Multinational Cash Management and Conglomerate Discounts in the Euro Zone,”
International Business Review. 11(4):. 453‐464 (2002).
6 European Commission, Making Payments in the Internal Market, COM (90) 447:1, 26 September 1990.
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