ECB-CFS Research Network on "Capital Markets and Financial Integration in Europe" Financial Integration in Europe". The Network aims at stimulating top-level and policy-relevant research, significantly contributing to the understanding of the current and future structure and integration of the financial Working Paper Series is issuing a selection of papers from the Network. This selection is covering the priority It also covers papers addressing the impact of the euro on financing structures and the cost of capital. The Network brings together researchers from academia and from policy institutions. It has been guided by a Steering Committee composed of Franklin Allen (University of Pennsylvania), Giancarlo Corsetti (European (ECB), Jan Pieter Krahnen (Center for Financial Studies) and Axel Weber (CFS). Mario Roberto Billi, Bernd its work. Jutta Heeg (CFS) and Sabine Wiedemann (ECB) provided administrative assistance in collaboration with staff of National Central Banks acting as hosts of Network events. Further information about the Network can be found at http://www.eu-financial-system.org. areas " European bond markets", " European securities settlement systems", " Bank competition and the geographical University Institute), Jean-Pierre Danthine (University of Lausanne), Vitor Gaspar (ECB), Philipp Hartmann scope of banking activities", " international portfolio choices and asset market linkages" and " start-up financing". This paper is part of the research conducted under the ECB-CFS Research Network on " Capital Markets and system in Europe and its international linkages with the United States and Japan. After two years of work, the ECB Kaltenhä user (both CFS), Simone Manganelli and Cyril Monnet (both ECB) supported the Steering Committee in