Inefficiencies in clearing and settlement represent the most primitive and thus most important barrier to integrated financial markets in Europe, states Dr Albert Giovannini in a new report presented to the European Commission.
The objectives of the report are to assess the current arrangements for cross-border clearing and settlement and to identify the main sources of inefficiency.
The report concludes that fragmentation in EU clearing and settlement complicates cross-border securities transactions, leading to higher costs for investors. Complications arise because of the need to access many national systems, whereby differences in technical requirements/market practices, tax regimes and legal systems act as barriers. The report concludes that efficiency could be significantly improved by market-led convergence in some of the technical requirements/market practices across national systems.
The Commission will draw on the information in the Giovannini report in preparing its blueprint for clearing and settlement, which will be issued early next year. A second report of the Giovannini Group, scheduled for mid 2002, will focus on policy aspects and examine some of the possible models to deliver more efficient clearing and settlement in the EU.
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