Over the past decade, considerable progress has been made in integrating Europe’s financial markets, facilitated by policies to ensure the free flow of capital and provision of financial services across borders and the adoption of the euro. Financial innovation and enhanced market integration have changed the face of the European financial system, enhancing competitive pressures, although impediments still remain. New financial products have led to the unbundling of risks and large banking groups have emerged, operating across national borders and in multiple market segments. These have increased the inter-linkages between markets and institutions across the euro area, raising questions about whether the speed and the channels of monetary policy transmission in the euro area have changed.