Introduction: the Treaty basis

During the 1990s European financial institutions experienced far-reaching regulatory reform. In contributing to a stable macroeconomic environment, the EMU adds another building block to strengthen the financial system. With monetary policy at the European level, macroeconomic disturbances can be reduced and the stability of the financial system reinforced.

The European Central Bank (ECB) together with the European System of Central Banks (ESCB) are not only the focal point of the EMU but they are also essential for the functioning of Europe's financial markets. While London has remained and will remain a global and European financial centre, the ECSB and the ECB as well as the EMU have become important for the functioning of this and other centres as part of international financial markets. This was already foreseen immediately after the decision on the EMU as can be illustrated by reference to a speech by Ian Plenderleith, then Executive Director, Bank of England, at a conference organised by the International Center for Monetary and Banking Studies in November 1997. Plenderleith argued: