There are currently eleven separate markets for bank reserves in the European Community. In Discussion Paper No. 818, Research Fellow Jacques Mélitz maintains that the emergence of a single interbank market for reserves following monetary union would raise a policy dilemma. Either competition must be allowed to decide the location of the interbank market in which the national central banks will compete, or the location of this market must be decided from the outset, which requires the adoption of a uniform blueprint of central banking. Mélitz reviews the advantages and disadvantages of competitive and centralized solutions in the light of US experience and considers the relative merits of London, Frankfurt and Paris as locations for a centralized interbank market.

Jacques Mélitz presented this paper at a September lunchtime meeting, reported in more detail in this issue of the Bulletin.

Reflections on the Emergence of a Single Market for Bank Reserves in a European Monetary Union
Jacques Mélitz

Discussion Paper No. 818, July 1993 (IM)