The findings reported here raise some serious concerns. Relative to domestic transactions, transactions within the European economy that occur across Member Sates are far more complex, are hindered by a number of significant barriers and, given the data that the group has been able to collect, are much more costly than domestic transactions. It is perhaps no exaggeration to conclude, from the analysis in this report, that inefficiencies in clearing and settlement represent the most primitive and thus most important barrier to integrated financial markets in Europe. The removal of these inefficiencies is a necessary condition for the development of a large and efficient financial infrastructure in Europe.

This is the first of two reports on cross-border clearing and settlement arrangements in the European Union and focuses on identifying the sources of inefficiency that exist in the current arrangements. A second report, to be published in 2002, will be more forward looking and will attempt to assess the prospects for the EU clearing and settlement architecture, with a particular emphasis on public policy aspects.