Liberalization and Regulation in the Process of Financial Market Integration in the European Community

In 1986 the twelve member countries of the European Community (EC) signed the “Single European Act” according to which the internal market should be established by the end of 1992. The plan is to have a market without internal frontiers allowing the free movement of goods, services, labor, and capital. As an essential component, the completion of the 1992 single market program involves the realization of a genuine EC-wide common financial market. This paper is concerned with major achievements and shortcomings in the realization of the program to complete the so-called “financial dimension” of the internal market. It emphasizes the efforts towards the liberalization of capital movements and towards the creation of a new regulatory order for the community-wide supply of financial services as the two basic forces driving the process of financial market integration in the EC.