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Negotiable
Financial Instruments > This page
Eurodollar
The
Nature of the Eurodollar
The Size of the Eurodollar
Market (Member section)
Incentives for Development of the Eurodollar Market (Member
section)
Instruments of the Eurodollar Market (Member
section)
Interest Rate Relationships Between Eurodollar Deposits and Deposits
at Banks in the United States (Member
section)
The Relative Riskiness of Eurodollar Deposits and Dollar Deposits Held
in the United States (Member section)
Summary (Member section)
Resources (Member section)
The
Nature of the Eurodollar
Eurodollars are bank deposit liabilities denominated in U.S. dollars
but not subject to U.S. banking regulations. Banks that offered
Eurodollar deposits were located outside the United States. However, since
late 1981 non-U.S. residents have been able to conduct business, free
of U.S. banking regulations at International Banking Facilities (IBFs)
in the United States. Eurodollar deposits
may be owned by individuals, corporations, or governments from anywhere
in the world, with the exception that only non-U.S. residents can hold
deposits at IBFs.
Originally, dollar-denominated deposits, not subject to U.S. banking regulations
were held almost exclusively in Europe; hence, the name Eurodollars. Most
of these deposits are still held in Europe, but they also are held at
U.S. IBFs and in such places as the Bahamas, Bahrain, Canada, the Cayman
Islands, Hong Kong, Japan, the Netherlands Antilles, Panama, and Singapore.
Regardless of where they are held, such deposits are referred to as Eurodollars.
Banks in the Eurodollar market, including U.S. IBFs, compete with banks
in the United States to attract dollar-denominated funds. Since the Eurodollar
market is relatively free of regulation, banks in the Eurodollar market
are able to operate on narrower margins or spreads between dollar borrowing
and lending rates than can banks in the United States. This gives Eurodollar
deposits an advantage relative to deposits issued by banks operating under
U.S. regulations. The Eurodollar market has grown largely
as means of avoiding the regulatory costs involved in dollar-denominated
financial intermediation.
The
Size of the Eurodollar Market
Eurodollar volume is measured ....................
More
information is provided in the Member Area
Recommended further reading:
Certificates
of Deposit: Utilizing foreign fixed deposits (CD's) for credit lines
About Corporate Medium-Term Notes
Repurchase and Reverse Repurchase
Agreements
Books
on Financial Instruments
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