The European financial system remains fragile and fragmented due to the close relationship between sovereigns and banks, European Central Bank policymaker and Governor of the Bank of Spain Pablo Hernandez de Cos said.

«Investment portfolios are not well diversified and investment opportunities are lost as these may not always be matched with savers’ funds. The financial system remains fragile and fragmented because of the doom-loop between sovereigns and banks,» de Cos said during a conference in London.

The EU still lacks the necessary fiscal tools to cushion against asymmetric or large systemic shocks in the euro are, he said.

De Cos also noted that it was essential for policy makers to strengthen European regulators. «As European markets become more integrated and technologically complex, this is becoming a more essential element that policy-makers need to address,» he said.

Original Story:Reuters | Marc Jones 
Photo: FreeImages.com/Szymon Szymon
Edition:Prime Yield