Eurocurrency Market Flashcards
What is the Eurocurrency market?
A time deposit held in a bank located outside the country responsible for the currency in which the deposit is denominated
E.g. A dollar time deposit held in any banks branch in London / pound sterling deposit held in any banks branch in France
What are the costs and laws of the Eurocurrency market?
Essentially free and unregulated
Governed by the principles of competition (adv over domestic money markets which are more restrictive)
Higher interest on deposits because…
Avoidance of reserve requirements (insurance premiums, high volume/low value transactions
Lower operating costs because…
Large loans via telephone. Lower costs than domestic intermediation
Competition is guaranteed because…
New banks entering the market
World economic welfare increased because…
Efficient allocation of investment or financial resources
Determined by…
Demand
Which justifies their existence
