Lower interest rates are not being passed on fully by banks in some countries, Vitor Constancio, Vice-President of the European Central Bank said Monday. As bank funding is tight, rate reductions are passed on hardly, making credit unduly expensive in some parts of the euro area, said Constancio in a speech at Chatham House, London. Market fragmentation is severely disrupting the transmission of the ECB's monetary policy, he noted. But Constancio observed that Banking Union will limit financial fragmentation in a number of ways. He said the banking union will provide a single rulebook for banks, a single framework for banking supervision, create a backstop on direct bank recapitalization and a common system of deposit protection.