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Euro currency and its meaning on international market

Introduction

Eurocurrency is a currency that is placed in the form of a deposit in foreign banks located outside the country issuing the currency.

The prefix “euro” does not at all mean that the specified currency is located in Europe, that it is owned by Europeans, or that it is located in European bank. This only indicates that the territorial location of the bank that accepts the investment does not coincide with the territory where the currency is issued and is legal means of payment. Thus, a Eurodollar is a dollar deposited in a bank outside the United States, for example, dollars in a Brazilian or Japanese bank. Operations with the Eurodollar are not regulated by the United States (the country issuing the currency). The prefix “euro” indicates that the currency has escaped the control of national currency authorities, in particular the issuing central bank.

The depositor's citizenship or permanent residence does not influence the determination of whether a currency will receive the "euro" prefix. Quite often, an investment is made by a resident of the country issuing the specified currency (for example, an American opens a dollar deposit in Russia). Conversely, a dollar deposited in the United States by a German, even in a foreign bank (such as a branch of a German bank), would not be called a Eurodollar. Such a transaction is a domestic investment that is fully subject to US law.

Eurocurrency also includes funds that a bank accumulates for its clients in a currency that differs from the currency of the country where the bank is located.

The most common Eurocurrency is Eurodollars. In addition to them, there are Eurofrancs, Europounds, Euroyens and others.

The Eurocurrency and Eurobond markets have the advantage of being significantly less subject to regulation by the laws of the country issuing the currency, including interest rates and reserve requirements.

Eurocurrencies are currencies transferred to foreign bank accounts and used for transactions in all countries, including the country issuing the currency. The prefix “euro” indicates the release of national currencies from under the national regulation and control of national currency authorities.

1. Historical background for the creation of the European currency

From ancient times to the present day, Europe has been shaken by wars and conflicts related to the redistribution of spheres of influence, the collapse and merger of states. Before the formation of feudalism, decline and disunity were established in Europe, associated with a gradual departure from pagan culture. At this time, previous economic, trade and political ties were disrupted, and various national communities lived independently of each other. The main problem there was security due to constant raids by nomads, Muslims and Vikings. As a result of the destruction of traditional economic ties With the Roman Empire, Europe became a closed economic space. After the establishment of feudal orders as a result of the strengthening of defensive and offensive forces, three rules were put into the basis of the economy: the feudal lord was obliged to bear military service; he had the right to land allotment; he was directly subordinate to his overlord. A union of the state and the Christian church arose.

From now on, European states not only ensured their security from external attacks, but were also able to move on to the conquest of new territories. At the same time, the beginning of destructive military clashes within Europe was laid. To achieve this, monarchs created expensive bands of mercenaries who did not recognize any discipline. These same mercenaries were used by large trading companies to fight the conquered peoples of Africa and Asia. By the middle of the sixteenth century. the borders of states of a new type, with a non-feudal type of power, were outlined. Costly wars of a religious nature undermined economic development. Bands of marauders devastated Europe; Pirates were rampant in the seas and oceans. The first to change this situation was Holland, which created a professional army. France and England followed suit.

From then on, economics and politics merged as the cost of maintaining armies led to the creation of state apparatuses and tax systems.

The result was a stable order based on military-political balance. This led to economic development, the creation of new types of production based on hired labor.

Subsequently, Europe was shaken by the French Revolution and the subsequent wars between France and other states; Napoleon's activities, which led to the capture of almost all countries except England and Russia. By the first half of the nineteenth century. After the defeat of Napoleonic army, a new pan-European system began to be built. It was supposed to ensure the prevention of revolutionary movements. However, the conservatism of the Holy Alliance of Austria, Prussia and Russia came into conflict with the rapid development of reality - technical revolution, the emergence of a new bourgeois class.

The period before the First World War was characterized by a semblance of calm; accumulated disagreements led to the fact that the war of 1914-1918. passed with an unprecedented scale of destruction and conquest. One of its results was the establishment of a new order on the territory of Russia, its isolation from other states. The ideas of European integration were revived with renewed vigor. For many centuries they were discussed by the Christian Church; later, with the split between Catholics and Protestants, the “European idea” acquired an anti-war connotation; many famous philosophers and scientists of those times devoted their works to it.

As a result of the Second World War, these ideas began to be translated into reality, primarily due to the reality of the threat from the USSR.

eurocurrency bank depositor euroloan

2. Eurocurrency market and Euro capital market

The Euromarket is a market where operations on credits and loans in Eurocurrency are carried out.

Eurocurrency is the convertible currency of a country, transferred to the accounts of foreign banks and used by them for transactions in all countries, including the country that issued this currency.

Euromarkets are not governmental, state markets. Their emergence is determined by the needs of enterprises, investors, and also some countries. Transactions on the European markets elude the state currency regulation and from tax legislation specific country.

Euromarkets emerged in the late 50s. The reasons for their occurrence include:

* 1) the emergence of proposals to place dollars outside the United States;

* 2) great demand for US dollars in Europe;

* 3) regulation of the US authorities, complicating currency operations with the dollar domestically versus free market transactions;

* 4) the desire of European banks to find a means of financing international operations.

At first, only the Eurodollar dominated the Eurocurrency market.

A Eurodollar is a US dollar received as a deposit by a Western European bank. A dollar recorded as a bank liability as a liability in a French or British bank is a Eurodollar. Gradually, the Eurodollar developed into a Eurocurrency phenomenon. So, for example, the French franc or German mark in the liability of a bank in Luxembourg or Great Britain was a eurofranc or euromark.

Current transactions on the European markets are dominated by transactions with Eurodollars (more than 70%), Euromarks (20%) and Swiss franc (6%).

It should be noted that the emergence of the Eurodollar was largely facilitated by the USSR authorities. According to M. Pebro, Soviet authorities did not want to invest dollars in American banks or place them on foreign exchange market USA. This position was explained, in particular, by the reluctance to strengthen the financial power of the United States, the fear of blocking USSR accounts in the event of possible conflicts, etc. As a result, the dollars owned by the USSR were invested in the Eurobank - a branch of the USSR State Bank in Europe, and then in the Moscow National Bank in London. In turn, British banks also made efforts to create the Eurodollar.

The Eurocurrency market is international in nature. Large operations in this market occur in Asia (Hong Kong and Singapore), the Caribbean (Bahamas and Cayman Islands), Canada, and London. The leading center of the Eurocurrency market is London. Luxembourg is the center of deposits in euromarks, and Brussels and Paris are centers of deposits in europounds. 60% of transactions with eurocurrencies occur in these European capitals.

The main sources of Eurodollars are:

* 1) foreign states or citizens wishing to store dollars outside the United States;

* 2) international corporations and European banks that have cash reserves that exceed current needs;

* 3) reserves of countries with a positive foreign trade balance, for example Japan, Taiwan, Germany.

Demand for Eurocurrencies comes from individuals, companies, and national governments in need of capital, investment and funds to pay debts and interest on them.

In the early 80s. the volume of the Eurodollar market exceeded the capabilities of the national banking system USA. Under these conditions, the US government decided to introduce international banking services, which allowed American banks attract part of the Eurocurrency market to the United States. Regarding international banking services No reserve requirements or federal deposit insurance apply. They are also not subject to federal or New York state income taxes. Active development of European markets in the 60s and 70s. led to the fact that in the 80s and early 90s. they have noticeably diversified their activities. Since the 80s. there is a rapid development of securities markets: Eurobonds, Euroshares, Eurobills, financial innovation. For example, Eurobonds are issued to make Euroloans.

Euroloans are usually issued with the help of large banks, which organize international consortia and syndicates for their issuance. Banks attract various credit and financial institutions to participate in consortia: pension funds, insurance and investment companies. By the beginning of the 90s, Euroloans accounted for about 80% total amount international loans.

Eurobonds (Eurobonds) are usually issued for a period of 7 to 15 years. In the 80s bonds issued for 30 and 40 years appeared. The main borrowers are governments, international organizations, TNCs, local authorities, government agencies.

Eurobonds can be issued by foreign or national companies, individual states. Eurobonds are denominated in foreign currencies. For example, a bond denominated in German marks is a Eurobond if it is sold outside Germany, regardless of whether it was issued in Germany or elsewhere. Most Eurobonds are denominated in dollars and sold in Europe. Eurobonds are bearer bonds. This means that they are not registered and no tax is charged on the income received from them. A large number of Eurobonds are kept in Switzerland in the accounts of non-residents of this country.

Eurobonds can bring either fixed or floating interest to their owners. Eurobonds with floating rates have coupons interest payments, the value of which is tied to the LIBOR rate. The interest rate can be adjusted once every 6 months or annually. By the mid-80s. Most Eurobonds had floating interest rates.

Some Eurobonds provide the right to choose their conversion into a certain number of shares of the company issuing these obligations. Convertible Eurobonds are called “equity-linked obligations”.

3. European Monetary System: the first step towards true monetary integration

The initiators of the creation of the EMU were German Chancellor Helmut Schmidt and French President Valerie Girac d'Estaina, who presented this idea to the heads of other states of the European Union in April 1978 in Copenhagen. The agreement on the creation of the EMU came into force on March 13, 1979; from nine member countries Only Great Britain did not join the EU. By creating the EMU, European countries declared independence from the global monetary system, for the first time deciding to independently determine their monetary policy. Instead of focusing on the dollar, they decided to focus on the stability of their currencies. The normal state was a stable ratio of currency parities; it could be revised only when absolutely necessary, by decision of the Commission of the European Communities and Member States. A collective unit of account was introduced - the ECU, the rate of which was determined based on the exchange rates of the national currencies of the participating countries. Both national currencies and ECU were used in parallel in the settlement mechanism. Thus, participating States in the field of policy currency relations for the first time they made such a movement from national sovereignty to collective interaction.

The ECU was backed by funds in the amount of 20% of the gold and foreign exchange reserves of the participating countries, which were contributed in exchange for an equivalent amount of ECU for deposits into the European Monetary Cooperation Fund.

The main directions of action by EMU members were the maintenance of market rates of national currencies with the help of foreign exchange interventions, attracting resources to normalize balances of payments, regulation interest rates and budget deficits to protect exchange rates; V extreme cases Tightening controls on the movement of capital and freezing prices and incomes were allowed.

Over time, it became clear that the original plans were not fully implemented, in particular, the European Monetary Fund, which was supposed to unite all actions within the framework of the EMU, was not created. States did not always adhere to a single, parity-based ECU, economic policy. For 13 years, the existence of the EMU was quite successful. These years are divided into three periods:

From the entry into force of the agreement until March 1983. - started calmly, but maintaining economic growth in West Germany led to a weakening of the mark. During this period, there were 7 revisions of central courses. One of the reasons for the revisions was the second energy crisis of 1979-1980, the results of which were a surge in inflation, growing balance of payments deficits, a fall in industrial production and rising unemployment. In general, these revisions often took place against the backdrop of political events, in particular, changes in power, which entailed adjustments to state policy, for example, the election victory of the socialist Francois Mitterrand in May 1981;

The success of the EMU also occurred due to external circumstances. Changing them in the future along with non-acceptance necessary measures governments brought serious challenges to the EMU.

4. Economic and monetary union. Introduction to Euro

The second half of the 1980s was characterized by the unprecedented rise of a unifying Western Europe. At the same time, monetary integration lagged behind economic cooperation. The stability of the EMU gave rise to expectations that it would develop into an economic and monetary union, differing from the EMU by a greater degree of integration. In April 1989 the Delors Committee, which included the governors of the central banks of EU member states, three independent expert and a representative of the EU Commission, presented a report in which he spoke in favor of the early introduction single currency at the final stage of creating the EMU. By this time, the governments of the EU member states had agreed to continue integration and, in particular, the creation of EMU. The report of the Delors committee was adopted unanimously. True, he was criticized for being too consistent with Werner’s report, the key provisions of which, for example, currency convertibility, have long become a fait accompli. However, this continuity and some archaic definitions helped the unanimous adoption of the report by the governments of European countries, which are traditionally reluctant to change the established foundations.

In June 1989 The Maastricht summit took place, at which two main organizational proposals made by the Delors Committee were adopted: to begin the first stage of the transition to an economic and monetary union from July 1, 1990. and convene an intergovernmental conference to work out changes to the fundamental treaties, without which further progress would be impossible. The conference participants put forward demands, compliance with which was mandatory for joining the EMU: to limit budget deficits to 3%, and public debt to 60% of GDP.

Three stages in the formation of EMU.

The first stage took place on July 1, 1990. until December 31, 1993 During these years, all the preparatory measures necessary by virtue of the Maastricht Treaty on the European Union were carried out. Restrictions on the free movement of capital within the EU and between the EU and other countries have been removed.

The second stage - from January 1, 1994. until December 31, 1998 - dedicated to further preparations for the introduction of a single European currency. The European Monetary Institute was established. Legislation to limit funding was adopted public sector, privileged access of public sector enterprises and organizations to funds of financial institutions has been abolished. In addition, measures have been taken to comply with restrictions on the budget deficit and state debt. Central banks were given, where necessary, final statutory independence from their governments. May 2, 1998 The Council of the EU decided which states are allowed to switch to the euro from the beginning of the third stage of the formation of EMU.

The third stage began on January 1, 1999. and continued until July 1, 2002, after which the euro finally became the only legal tender for all member countries of its zone. Now the exchange rates between the euro and the national currencies of the member countries of its zone are firmly and definitively fixed. The euro becomes theirs common currency, replacing the ECU in a 1:1 ratio. The European System of Central Banks begins its activities, which will encourage the introduction of the euro in international currency markets. Wholesale transactions from euros to open market available for banks from January 1, 1999, retail - after January 1, 2002. Issue of debt obligations government agencies from January 1, 1999 Produced only in euros. Enterprises have the right to make payments in euros from January 1, 1999. Private individuals will be able to use euro coins and banknotes from January 1, 2002, when their release into circulation begins, simultaneously with the withdrawal of national banknotes from circulation.

European Central Bank.

The Governing Council of the European Central Bank is part of the European System of Central Banks. Subordinate to him are the managers of supranational central banks and members of the executive board. The ECB directs the activities of national central banks and its authorized counterparties.

The main goal of the European System of Central Banks is to maintain price stability. To this end, her responsibilities include the monetary policy of the EMU, foreign exchange transactions with third countries, storage and management of liquid international reserves of participating countries, ensuring the uninterrupted operation of payment and settlement systems. The sole shareholders of the European Central Bank are national central banks. The creation of the ECB is an important step towards a united Europe. It, like national central banks at present, must be independent of political power and have sufficient freedom. Power is transferred to the ECB from national governments, leaving these governments with few ways to influence monetary policy. They have no real power over the operational management of the bank. This may complicate the work if national interests conflict with the ECB's policies, in which case a situation may arise that can be resolved on an all-or-nothing basis, and it will be possible for participants to withdraw from the economic and monetary union. At the same time, the independence of the ECB is necessary to depoliticize the monetary and financial sphere: from the experience of past decades, it is known that policy often had a negative impact that was poorly predictable from an economic point of view.

The European central bank needs to gain its legitimacy, which requires, at the very least, to successfully combat inflation without negatively impacting the production of goods and services.

When determining the type of construction of the ECB model, the creators had a choice between the American and German models monetary policy. As a result, the ECB was initially supposed to receive the main feature of the German model: price stability, maintaining them as much as possible. low level take precedence over other goals. According to the requirement of the European Monetary Institute, annual inflation rates should not exceed 2%. Unlike the US, the German model is based on minimum reserve requirements and infrequent open market operations to reduce fluctuations in liquidity and stability of interest rates. The disadvantages of this model are the actual imposition of additional taxes on banks if the interest on reserve deposits is not paid or is significantly lower than the market one; there is a desire to reduce the reporting results for the past period in order to reduce losses from high reserve rates at low interest rates.

As a result, in the summer of 1998. it was decided to combine German and American models. Introduced mandatory reservation, however, assets less than 100 thousand euros are exempt from it, and for larger ones the reserve rate will be 2%. Interest will accrue on reserves. Support for stable prices can be carried out both by regulation of short-term interest rates and by intermediate regulation money supply. These measures are characterized by difficult predictability of the impact on the economy in each specific case, but the ECB has said that it will build on the positive experience of central banks.

5. Euro and dollar

Today, the American dollar remains the reigning monetary measure. In the 90s, 50-60% of foreign exchange reserves of states, 60-70% of exports and imports, 70% of bank loans, approximately 50% of bond issues, 80% of transactions in foreign exchange markets were formed in US dollars. In 80 percent of all financial transactions, the dollar is one of the parties. But the emergence of the euro, according to a number of experts, should be regarded as the beginning of the process of partial de-dollarization of the world economy. The United States economy is not strong enough for Greenback to be the only favorite financial markets. It is common knowledge that the US share of world production is 27 percent, but less than 20 percent of world trade. However, when foreign countries and their citizens hold their savings or transact in dollars, they indirectly subsidize the United States by providing it with a high, or rather inflated, standard of living that does not match theirs. real income. With the strengthening of the euro, as a Washington Post expert writes, “the United States will be forced to live within its means, like everyone else.” Special attention deserves the opinion of Robert A. Mundell, the author of the theory of optimal currency areas (which formed the basis of the monetary integration of EU countries), laureate Nobel Prize on economics for 1999: the euro exchange rate during the current year may be higher than the US dollar exchange rate. He connects his forecast with the fact that the economic growth USA, which became one of the reasons for the strengthening of the dollar in Lately, will slow down this year or next due to high oil prices, and the resulting need to finance the balance of payments deficit in the United States will significantly strengthen the position of the euro. At the same time, the recent depreciation of the euro against the dollar was caused by objective reasons for the European integration process, which is generally positive for the European economy and will further stimulate its growth. According to Mundell, the euro area will expand significantly in the coming years, and in 10 years it could include up to 50 countries. However, the zone of influence will also expand American currency, due to which the strength of these currencies will remain approximately equal. The scientist’s opinion is confirmed by events in the foreign exchange markets. During trading on May 30 this year on the exchanges of Southeast Asia, the euro exchange rate rose to a recent record level of $0.92. While this increase in itself is not particularly high, it may nevertheless mark a reversal of a fairly stable trend.

Conclusion

For all its problems and troubles, Europe nevertheless does not stray from its chosen course, and its transformation into some kind of United States of Europe is a matter of time. Almost all countries and peoples of the continent are joining in the construction of a pan-European home, and the coming century will be marked by the transition of Europe into a completely new hypostasis - into a powerful multinational state entity. Up to thirty states will be integrated into this new conglomerate - almost all Eastern Europe(the first, most likely, will be Ukraine), island entities in the Mediterranean and, apparently, Turkey. However, in this union of equal partners, four leading leaders will dominate and set the tone - Germany, France, Great Britain, Italy. This is obvious even now. After all, in the capitals of these countries, all fundamental decisions are developed for their subsequent approval by others. But the job is done - for those who once entered the European Union there is no turning back. Everything is designed in such a way that outside this coalition of countries that voluntarily agreed to join it, none of them can exist - the dissident country is doomed to inevitable death. As a result, a united Europe, tightly bound by the hoops of mutual obligations and uniform rules of behavior for all in internal life and external affairs, in its power and influence can become something more significant than a superpower. She has a chance to gain a leading, dominant place in the world.

As for the European currency itself, in my opinion, there are many contradictions. As mentioned earlier, United Europe is a multitude of states with deep traditions. The introduction of the euro thus destroys all traditional currency ties. Francs, marks, pounds sterling... Now these are all in the past, but in the minds of many people they will remain true national currencies for a long time.

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Eurocurrency currency transferred to foreign accounts

banks and used by them for transactions in all countries, including

the country of issue of this currency. Although Eurocurrencies operate on

world market, they retain the form of national monetary units.

The prefix “euro” indicates the emergence of national currencies

from national regulation and central jurisdiction

issuing bank. Initially, Eurodollars included dollars that belonged to

foreigners and deposited in European banks outside

USA. Since the 1960s the Eurocurrency market began to include currencies of other leading

The Euromarket is part of the global market for loan capital, on

in which banks carry out deposit and loan operations in Eurocurrencies.

Features of the Euromarket:

1. Huge scale. The volume of transactions on the Eurocurrency market exceeded

$6 trillion in the early 2000s.

2. Lack of clear spatial and temporal boundaries.

The global credit market continuously operates, overcoming

limited time zones in search of optimal conditions (economic,

especially tax, political) for credit operations.

3. Institutional feature. From an institutional point of view

In terms of view, the global credit market is a set of credit and financial

institutions through which the movement of loan funds is carried out

capital in the field of international economic relations. To them

include: private firms and banks, primarily TNCs and TNB , stock

exchanges (approximately 40% of all transactions), state enterprises,

government and municipal bodies (more than 40%), international

financial institutions (about 20%).

4. Limiting borrowers’ access to the global loan capital market.

The main borrowers in this market are TNK, TNB

governments, international financial institutions. Developing

countries, including their governments, have limited capacity

resort to borrowing on the world market.

5. Using the currencies of leading countries as transaction currencies.

The US dollar dominates the Eurocurrency market, although its share is declining

(over 80% in the 1960s, 68% in 1980, 50% in the early 2000s).

Transactions on the European market are carried out in the single European currency,

the use of which is increasing, also in Euro-Swiss francs,

pounds sterling and other leading currencies.

6. Simplified standardized transaction procedure

using innovative technologies.

7. International interest rates. Specifics of interest

rates on the European market lies in their relative independence

in relation to national rates.

Interest rate on the Eurocurrency market

includes as a variable LIBOR the London interbank market

short-term interbank offer rate

deposits in eurocurrencies (usually for 6 months), and as a permanent

element of the premium to the base rate: spread, i.e. prize

for banking services.

8. Higher profitability of transactions in Eurocurrencies than in

national currencies; it means that rates on eurodeposits

higher, and lower for Euroloans, since it does not apply to Eurodeposits

system of required reserves, which commercial banks

are required to keep an account with the central bank, as well as income

interest tax.

Eurocurrencies: concept and essence

The Eurocurrency market operates on the basis of freely convertible national currencies, which, when deposited outside the country of origin in an international bank, become Eurocurrencies. The prefix “euro” indicates that a foreign currency deposit denominated in dollars, yen or other currencies is placed outside the country of issue of the currency and is not subject to its jurisdiction. So, for example, dollars on deposit in Paris are Eurodollars; A euro in a bank in London or New York is a euro currency denominated in the national currency of the eurozone, the euro.

The first eurocurrency was the dollar, deposited in banks in Western Europe. Subsequently, the currencies of leading Western European countries, and then the yen, began to be placed in international European banks in foreign countries and used as Eurocurrencies. These currencies retain the prefix “euro” even if they are placed in non-European countries, as a sign that they are not regulated by the legislation of the country of issue, are offshore 1, non-national, they are called “stateless money”.

Eurocurrencies move freely around the world and have tax and other advantages compared to the national currencies from which they were formed. The determining factor in belonging to local currencies is not the nationality of the bank in which the currency is deposited, but its location in the territory of a country with another local currency.

Only a few currencies of leading countries are used as Eurocurrencies: US dollar, euro, english pound sterling, Swiss franc, Japanese yen. The development of the Eurocurrency market and their widespread use in international settlements and payments characterize them as international currencies. Eurocurrency interest rates are close to rates for this currency in local markets, but deposit rates are higher and credit rates are lower, while the difference between them (spread 2) is lower than in the domestic market, due to lower costs.

Eurocurrency markets and their features.

Credit markets, securities markets and derivative financial instruments (derivatives) operate on the basis of Eurocurrencies. The Eurocurrency market, like the foreign currency market, belongs to the international money market and is its segment. Transactions with Eurocurrencies, Euroloans and securities denominated in Eurocurrencies are carried out through Eurobanks. Eurocurrency markets are offshore markets, international in currency, placement, and transaction mechanisms. The Eurocurrency market covers all leading international financial centers.

Credit transactions in Eurocurrencies when crossing the border do not require conversion into domestic currencies, since they are outside the scope of national currency legislation. Intermediaries in such operations are most often international banks foreign to the host country, which provides a more liberal regime for regulating their operations by local authorities.

A distinctive feature of the institutional structure of the European markets is the concentration of transnational banks (TNB) and international banking groups (consortia) in the European markets.

The Eurocurrency market is a banking market for short-term capital, where short-term depositing, lending and borrowing are carried out in Eurocurrencies. In contrast to the foreign exchange market, which provides the basic funds for various financial transactions, incl. payment, arbitrage, hedging, speculative, the eurocurrency market is a market for loans and deposits.

The Eurocurrency market is an international system of offshore banks. An offshore, or Eurobank, is a non-resident bank located in an international financial center or an offshore banking center. Any bank can also be an offshore Eurobank if it is exempt from national regulation and can accept deposits and issue loans in Eurocurrency to non-residents.

Transactions between Eurobanks and other financial institutions constitute the essence of the Eurocurrency market.

The interbank eurocurrency market is organized as an international over-the-counter market, the participants of which are united by electronic means of communication. The emergence and development of the Eurocurrency market are associated with the internationalization of the banking business, with the transition from the traditional to the modern banking system.

The traditional banking system is based on banks accepting and holding deposits and making loans in the currency of the bank's home country and subject to local regulation. Transactions in domestic currencies are complex, inefficient and expensive; they generate cash flows in different currencies. Managers dealing with domestic currencies have to deal with different banks in different countries for each individual currency. They can also work with one bank, but then they will have to systematically exchange all foreign currencies to domestic currency, as well as reverse transfer for making payments in different currencies.

The modern eurocurrency system allows banks to accept and hold deposits and provide loans in any currency, regardless of its origin. Transactions in Eurocurrencies are more consistent with the modern global economy than transactions in domestic currencies carried out abroad. That. The emergence and development of the Eurocurrency market is determined by cost factors and convenience for all participants in the transaction.

Loans and borrowings on the Eurocurrency market are short-term (no more than 1 year). This is a wholesale market, the minimum transaction amount is $1 million. Access to the market is open only to first-class users, so there is no need for deposit insurance. The scale of transactions allows you to receive large profits at low prices; Interest rates are determined by the relationship between supply and demand. Eurocurrency markets, through transactions, influence the volume and direction of international trade and capital flows, which is reflected in the balance of payments.

For example, if Honda uses its Eurodollar deposit to purchase goods in the United States, this will be reflected in the trade balances of both countries. If a Euro loan is spent on the purchase of securities in the United States, this will be reflected in the capital accounts of both countries. If Honda uses a Euroloan in a third country to purchase goods, services or securities, the balance of payments of the third country will also be affected.

The eurocurrency system does not have a serious impact on inflation. It can provide loans by multiplying its reserves, but cannot create money, because The obligations of European banks, unlike the obligations of domestic banks, are not considered a means of payment.

There is a relationship between the Eurocurrency market and international currency markets. Loss of stability in one market has a destabilizing effect on another market, with a stronger impact on the European market.

With the advent of the European markets, an international credit mechanism began to take shape with its own system of interest rates, concentrating the demand and supply of loan capital on a global scale.

Origin of the Eurocurrency market

The Eurocurrency market is not a new phenomenon in the world economy. Before and after the First World War, most Western European banks accepted foreign deposits. currencies The Eurodollar market began with the USSR's fear of US sanctions in the post-World War II period. During the Cold War, the USSR preferred to keep export dollar earnings in banks in France and England. Further development of markets is associated with the restoration of the convertibility of Western European currencies and the restrictive monetary and financial policies of the United States and Great Britain. In 1958, the European Payments Union was liquidated and the convertibility of Western European currencies was restored. The convertibility of the currencies of Germany, France, and Italy stimulated the development of the Eurocurrency dollar market. From now on, residents of Western European countries could place their dollar savings in commercial banks instead of depositing them with central banks. European banks were able to hold American dollars without converting them into local currency through central banks.

Motivation of participants in Eurocurrency markets.

Market participants, who can act as borrowers, lenders and intermediaries, are international and regional organizations, central and commercial banks, brokerage firms, insurance companies and other institutional investors, commercial and industrial corporations, governments, government departments, wealthy individuals. Many participants from developed countries are both lenders and borrowers, and developing countries and countries with transition economy- mostly borrowers.

Transfer of capital between economic agents different countries motivated by various factors:

Trade finance motive. Most trading is financed by borrowing from financial markets
Motive for borrowing/providing a loan. Many capital flows are carried out under the influence of the simple desire of some to receive the greatest possible income for their money, etc. financial. funds, others (borrowers) - find the lowest interest rate.
Speculative motive. Seeking to profit from a favorable change in future interest rates or exchange rate currencies
Hedging motive. Many provision of funds occur for the purpose of hedging a position, i.e. to reduce or avoid losses from future interest rates and foreign exchange rates.
The motive for the export of capital. The desire of investors to protect their finances. from increasing taxes in your country or to avoid possible restrictions on currency exchange (convertibility) or to protect your assets from political risk
Operations of European banks for the purpose of balancing liabilities and assets by currency and by maturity

Deposit instruments of the Eurocurrency market.

The market is wholesale, so demand deposits are not used.

Two types of eurocurrency deposit instruments are used: non-transferable time deposit (about 90% of the market) and transferable certificate of deposit (10% of the market).

A fixed-term Eurodeposit is a non-transferable bank deposit with a fixed term (7 days - 6 months, but can even be several years) and a fixed interest rate (depending on the term and type of currency).

Euro certificates of deposit are much more liquid than Euro deposits, but have a lower interest rate; the difference is usually 6-15 basis points (a basis point is 0.01%). Despite this, they are increasingly in demand from treasuries due to their flexibility.

Most Euro certificates of deposit are denominated in dollars or pounds sterling and are issued by European banks in London or New York.

Interest rates and spreads

Eurocurrency market interest rates are closely linked to domestic currency market interest rates, but Eurocurrency market prices and spreads are lower. Lower spreads result from the fact that, for example, the Eurodollar market offers lower prices to lenders and lower prices to borrowers than buying/selling prices on the domestic market. Interest rates on the domestic and eurocurrency markets move almost in parallel. Thanks to arbitrage, they differ only because of the additional costs, controls or risks associated with moving funds from one market to another. The sheer cost of transferring funds from one market to another is negligible. Differences between rates arise due to differences in the level of risk due to government regulations. regulation of the domestic foreign exchange market.

The level of interest rates depends on the type of currency - most high stakes were established for sterling deposits, the lowest for dollar deposits. The level of rates increases with increasing deposit period.

Advantages of Eurobanks :

Eurobanks are unregulated and have no reserve requirements, which allows them to offer higher interest rates on deposits and lower interest rates on similar loans than domestic banks
Eurobanks receive a lower spread between deposit and loan interest payments than domestic banks. They make money on the scale of transactions, average cost which are lower than the cost of internal operations. banks. The average size European bank deposit or loan - hundreds of thousands and millions of dollars, and domestic - tens or hundreds of thousands
European banks manage to avoid many of the costs and expenses that inevitably accompany internal banking regulation. They do not have to maintain a wide network of departments, do not need internal control mechanisms and the maintenance of expensive legal departments
The European banking business has high international competitiveness with relatively easy requirements for its formation. This provides European banks with greater efficiency and competitive prices
European banks do not have to pay deposit insurance
European banks provide loans exclusively to first-class large borrowers with a high rating and an insignificant risk of default. Domestic bank borrowers have high risk default, so banks charge a risk premium in the form of expensive loans and low interest rates on deposits

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The meaning of the word eurocurrency

euro currency in the crossword dictionary

Economic dictionary of terms

euro currency

cash banks located in other, mainly European, countries and denominated in the currency of that country. For example, a Japanese bank's deposit in European bank in Japanese yen gives grounds for this bank to issue a loan in euro yen;

national currencies of individual countries circulating outside the issuing country, transactions with which are carried out foreign banks on a significant scale.

Dictionary of financial terms

EUROCURRENCY

EUROCURRENCY (eurodollar, eurofranc, etc.), in which banks and firms keep their capital in foreign banks.

Wikipedia

Euro currency

Euro currency- currency that is placed in the form of a deposit in foreign banks located outside the country issuing the currency.

Console " Euro“does not at all mean that the currency in question is located in Europe, that it is owned by Europeans, or that it is deposited in a European bank. This only indicates that the territorial location of the bank that accepts the investment does not coincide with the territory where the currency is issued and is legal tender. Thus, a Eurodollar is a dollar deposited in a bank outside the United States, for example, dollars in a Brazilian or Japanese bank. Operations with the Eurodollar are not regulated by the United States. The prefix “euro” indicates that the currency is out of the control of national monetary authorities, in particular the issuing central bank.

The depositor's citizenship or permanent residence does not influence the determination of whether a currency will receive the "euro" prefix. Quite often, an investment made by a resident of the country issuing the specified currency will not be called a Eurodollar. Such a transaction is a domestic investment that is fully subject to US law.

Eurocurrency also includes funds that a bank accumulates for its clients in a currency that differs from the currency of the country where the bank is located.

The most common Eurocurrency is Eurodollars. In addition to them, there are Eurofrancs, Europounds, Euroyens and others.

Examples of the use of the word eurocurrency in literature.

Competition from thousands of European companies seeking to recruit Indian programmers to work on projects related to the transition to a single euro currency, further complicates the situation.

EUROCURRENCY

(eurocurrency) A currency located in one of the European countries, but not national currency of this country. For example, dollars deposited in a Swiss bank are called eurodollars, yen deposited in Germany are called eurooyen, etc. Eurocurrencies are used in providing and receiving loans and borrowings; The Eurocurrency market often provides an opportunity to obtain a cheap and convenient form of liquidity to finance international trade and foreign investment. The main borrowers and lenders are commercial banks, large companies and central banks. By attracting funds in eurocurrency, it is possible to achieve more favorable conditions and interest rates, and sometimes to avoid national regulation and taxation. Most deposits and loans are short-term, but the growing popularity of Eurocurrencies has resulted in medium-term loans, especially in the form of Eurobonds. To a certain extent, the Eurocurrency market replaced the syndicated loan capital market, in which banks, trying to share the risk of lending operations, united into groups. Euromarkets emerged in the 1950s.

Finance. Dictionary. 2nd ed. - M.: "INFRA-M", Publishing House "Ves Mir". Brian Butler, Brian Johnson, Graham Sidwell and others. General editor: Ph.D. Osadchaya I.M.. 2000 .

EUROCURRENCY

EUROCURRENCY - EUROCURRENCY (eurodollar, eurofranc, etc.), in which banks and firms keep their capital in foreign banks.

Dictionary of financial terms.

Euro currency

Eurocurrency is a currency placed in one of the European countries, but is not the national currency of that country.
Eurodollars are dollars deposited in a bank in a European country.
Euroyen - yen deposited in a bank in a European country. etc.

In English: Eurocurrency

Finam Financial Dictionary.

Euro currency

A currency located in one of the European countries, but not the national currency of that country. For example, dollars deposited in a Swiss bank are called Eurodollars; yen deposited in Germany are called euroyen, etc. Eurocurrencies are used in providing loans and borrowings; The Eurocurrency market often provides an opportunity to obtain a cheap and convenient form of liquidity to finance international trade and foreign investment. The main borrowers and lenders are commercial banks, large companies and central banks. By attracting funds in eurocurrency, it is possible to achieve more favorable conditions and interest rates, and sometimes avoid national regulation and taxation. Most deposits and loans are short-term, but the growing popularity of Eurocurrencies has resulted in medium-term loans, especially in the form of Eurobonds. To a certain extent, the Eurocurrency market replaced the syndicated loan capital market, in which banks, trying to share the risk of lending operations, united into groups. Euromarkets emerged in the mid-1950s.

1. Bank funds placed in other, mainly European, countries and denominated in the currency of that country. For example, a Japanese bank's deposit with a European bank in Japanese yen entitles that bank to issue a loan in euro yen.

2. National currencies of individual countries that circulate outside the issuing country, transactions with which are carried out by foreign banks on a significant scale.

Terminological dictionary of banking and financial terms. 2011 .

Synonyms:

See what "EUROCURENCY" is in other dictionaries:

- (eurocurrency) A currency located in one of the European countries, but not the national currency of that country. For example, dollars deposited in a Swiss bank are called eurodollars, yen deposited in Germany... ... Dictionary of business terms

- (Eurocurrency) Funds in a particular currency outside its country of origin. Such currencies do not necessarily have to be the national currencies of European countries: there are huge deposits of Eurodollars or Euroyen. The Eurocurrency market is very... Economic dictionary

- (English Eurocurrency) currency that is placed in the form of a deposit in foreign banks located outside the country of issue of this currency. The prefix “euro” does not mean at all that the specified currency is located in Europe, that it ... Wikipedia

Noun, number of synonyms: 2 currency (16) euro (4) ASIS Dictionary of Synonyms. V.N. Trishin. 2013… Synonym dictionary

euro currency- A currency located in one of the European countries, but not being the national currency of that country. For example, dollars deposited in a Swiss bank are called Eurodollars, yen deposited in Germany are called Euroyen... Technical Translator's Guide

euro currency- the currency of a European country... Dictionary of abbreviations and abbreviations

EUROCURRENCY- 1) funds of banks placed in others, mainly European countries and expressed in the currencies of these countries; currencies ( securities) the eurocurrency market and the euromarket, in which commercial banks non-cash deposits are carried out... ... Legal encyclopedia