Encyclopedic Dictionary of International Finance and Banking Phần 4 ppt

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EUROBANKS

Eurobanks are those banks that accept deposits and make loans in foreign currencies.

EUROBILL OF EXCHANGE

A Eurobill of exchange is a bill of exchange drawn and accepted in the ordinary manner but

denominated in foreign currency and approved as being payable outside the country in whose

currency it is denominated.

EUROBOND MARKET

The Eurobond market is an international market for long-term debt, whereas the foreign bond

market is a domestic market issued by a foreign borrower. A Eurobond market is the market

for bonds in any country denominated in any currency other than the local one. A bond

originally offered outside the country in whose currency it is denominated, Eurobonds are

typically dollar-denominated bonds originally offered for sale to investors outside of the

United States.

EUROBONDS

A Eurobond is a bond that is sold simultaneously in a number of countries by an interna￾tional syndicate. It is a bond sold in a country other than the one in whose currency the

bond is denominated. Examples include a General Motors issue denominated in dollars

and sold in Japan and a German firm’s sale of pound-denominated bonds in Switzerland.

Eurobonds are underwritten by an international underwriting syndicate of banks and other

securities firms. For example, a bond issued by a U.S. corporation, denominated in U.S.

dollars, but sold to investors in Europe and Japan (not to investors in the United States),

would be a Eurobond. Eurobonds are issued by MNCs, large domestic corporations,

governments, governmental agencies, and international institutions. They are offered simul￾taneously in a number of different national capital markets, but not in the capital market

of the country, nor to residents of the country, in whose currency the bond is denominated.

Eurobonds appeal to investors for several reasons: (1) They are generally issued in bearer

form rather than as registered bonds. So investors who desire anonymity, whether for

privacy reasons or for tax avoidance, prefer Eurobonds. (2) Most governments do not

withhold taxes on interest payments associated with Eurobonds. While depositors in the

short-term Eurocurrency market are primarily corporations, potential buyers of Eurobonds

are often private individuals.

EXHIBIT 39

Europe Moves Toward a Single Market

European

Currency

Unit (ECU)

Single

European

Act

Government-led

Creation

of Single

European

Market

Business-led

Debut of

the euro

Maastricht

Birth of Treaty

European

Economic

Community e-Commerce

explosion

EUROBANKS

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EUROCHEQUE

A check from a European bank that can be cashed at over 200,000 banks around the world

displaying the “European Union” pinnacle. It is similar to an American traveler’s check.

EURO-CLEAR

Telecommunications network that notifies all traders regarding outstanding issues of Euro￾bonds for sale.

EURO-COMMERCIAL PAPER

Euro-commercial papers (Euro-CP or ECP) are short-term notes of an MNC or bank, sold

on a discount basis in the Eurocurrency market. The proceeds of the issuance of Euro￾commercial papers at a discount by borrows is computed as follows:

where Y = yield per annum and N = days remaining until maturity.

EXAMPLE 45

The proceeds from the sale of a $10,000 face value, 90-day issue Euro-CP priced to yield 8%

per annum (reflecting current market yields on similar debt securities for comparable credit

ratings) would be:

Market price = $10,000/{1 + [(90/360) × (8/100)]} = $9,803.90

EUROCREDIT LOANS

Eurocredit loans are loans of one year or longer made by Eurobanks.

EUROCREDIT MARKET

Eurocredit market is the group of banks that accept deposits and extend loans in large

denominations and a variety of currencies. Eurobanks are major players in this and the

Eurocurrency market. The Eurocredit loans are longer than so-called Eurocurrency loans.

EUROCURRENCY

Eurocurrency is a dollar or other freely convertible currency outside the country of the

currency in which funds are denominated. A U.S. dollar in dollar-denominated loans, deposits,

and bonds in Europe is called a Eurodollar. There are Eurosterling (British pounds deposited

in banks outside the U.K.), Euromarks (Deutsche marks deposited outside Germany), and

Euroyen (Japanese yen deposited outside Japan).

EUROCURRENCY BANKING

Eurocurrency banking is not subject to domestic banking regulations, such as reserve require￾ments and interest-rate restrictions. This enables Eurobanks to operate more efficiently,

cheaply, and competitively than their domestic counterparts and to attract intermediation

business out of the domestic and into the external market. Eurocurrency banking is a wholesale

Market price Face value

1 N

360 --------     N

100 --------     + ×

= -----------------------------------------

EUROCURRENCY BANKING

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rather than a retail business. The customers are corporations and governments—not individ￾uals. They do not want checking accounts; they want to earn interest on their deposits.

Therefore, they lend on a short-term time deposits or they buy somewhat larger longer-term

certificates of deposits. They borrow anything from overnight call money to 8-year term

loans. Interest rates in the Eurocurrency market may be fixed or floating. Floating rates are

usually tied to the rate at which the banks lend to one another.

EUROCURRENCY MARKET

Also called a Eurodollar market or a Euromarket, a Eurocurrency market is a market for a

currency deposited in a bank outside the country of its origin, say, the United States, which

is based primarily in Europe and engaged in the lending and borrowing of U. S. dollars and

other major currencies outside their countries of origin to finance international trade and

investment. The Eurocurrency market then consists of those banks (Eurobanks) that accept

deposits and make loans in foreign currencies. The term Eurocurrency markets is misleading

for two reasons: (1) they are not currency markets where foreign exchange is traded, rather

they are money markets for short-term deposits and loans; and (2) the prefix euro- is no

longer accurate since there are important offshore markets in the Middle East and the Far East.

EURODEPOSIT

A eurodeposit or Eurodollar deposit, is a dollar-denominated deposit held in banks outside

of the U.S.

EXAMPLE 46

A Swedish investor may deposit U.S. dollars with a bank outside the U.S., perhaps in Stockholm

or in London. This deposit is then considered a eurodeposit.

See also EURODOLLAR.

EURODOLLAR

A Eurodollar is not some strange banknote. It is simply a U.S. dollar deposited in a bank

outside the United States. Eurodollars are so called because they originated in Europe, but

Eurodollars are really any dollars deposited in any part of the world outside the United States.

They represent claims held by foreigners for U.S. dollars. Typically, these are time deposits

ranging from a few days up to one year. These deposit accounts are extensively used abroad

for financial transactions such as short-term loans, the purchase of dollar certificates of

deposit, or the purchase of dollar bonds (called Eurobonds) often issued by U.S. firms for

the benefit of their overseas operations. In effect, Eurodollars are an international currency.

See also CREATION OF EURODOLLARS.

EUROLAND

See EUROPEAN ECONOMIC AND MONETARY UNION.

EUROMARKET DEPOSITS

Also called eurodeposits, Euromarket deposits are dollars deposited outside of the United States.

Other important Eurocurrency deposits include the Euroyen, the Euromark, the Eurofranc, and

the Eurosterling.

EUROCURRENCY MARKET

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