Interest Rates and Growth-Part 2

In the previous article I have shown data which indicate that the interest rates for loans in the South is much greater than the ones in the North. One way of explaining why is by looking at the bank rates for deposits with maturity of less than a year (Source: ECB). Have a look:

Cyprus

Greece

Spain

France

Well I think that the graphs are obvious: the cost of money for the Southern banks is substantially higher than for the Northern ones (for a graph of Germany's deposit rates take a look here). So, apparently the lending rates will be higher in the South than in the North. The big question here is why does it cost so much get new money in Cyprus, Greece and Spain?

In my opinion it boils down to two things: Uncertainty about the future of the economy and the banking system and the constant need for new money to fulfill regulatory requirements from a fixed pool of deposits. 

While the first is obvious, meaning that when a depositor or investor fears about losing his money he should be given a risk premium (i.e. additional motives, in this case a higher interest rate) in order to entice him not to leave. However, as many investors are risk averse (i.e. afraid of taking risks, in the finance lingo) they are fearful of moving their money to a country with economic difficulties and thus banks have difficulties in getting money from abroad, especially if they only operate within the country.

It is true that most Southern countries do not have banking institutions which operate in many EU countries. For example while Bankia, is the 4th largest bank in Spain and while it operates in Germany, Austria, China, France, Ireland, Italy, Poland, Portugal, the UK and the US it has limited access to funds outside Spanish borders. In the end of the spectrum, Banco Santnader, with significant presence all over the world has negligible needs. The same goes for Cyprus as Cypriot banks only have important presence in Greece, which has now evolved as the main cause of their problems. The only bank with a relatively large presence in the island which is not either Greek or Cypriot is Société Générale. In Greece HSBC and Citi are the only ones which are neither Greek nor Cypriot. In all three countries the market share of international banking institutions is minimal. The same holds for Italy, where only UniCredit has substantial presence in foreign markets.

Although I am not in favor of large banks (remember too big to fail scenarios in 2008-2009?) in this case, having a presence abroad would mean access to cheaper deposits, thus in its turn lowering both the deposit and lending rates in the country. Note that the banks which needed government intervention for continuing their operations during the EU sovereign crisis (and not the sub-prime lending one) were mostly the ones with limited access to foreign cash.

In addition to what I have said above look what the Governor of the Central Bank of France has stated: the interest rate facing individual private banks depends on the funding costs of the state where they are domiciled and not on the ECB overnight interest rate”

Yet, it seems like none of the EU policies has taken this phenomenon under consideration. If policies in the Euro level cannot have any effect in the national level then what is the Union's and ECB's purpose?