Sunday, April 5, 2009

international Bank lending (3)

in the literature ,component 1 above (loans in domestic currency to nonresidents) is generally referred to as traditional foreign bank lending .this type of activity has a long history :Banks are providing domestic currency to foreign citizen and firms for the financing of international trade .however .components 2and 3 of the gross lending (loans in foreign currency to nonresidents and loans in foreign currency to domestic residents)are relatively new ,becoming of large size only since the 1960s.these two situations reflect the use of a currency outside the country that issues the currency,and they have been dubbed as representing activity in the euro-currency market.indeed ,a euro currency deposit is defined as deposit in financial institution that is denominated in a currency other than the currency of the country in which the financial institution is located .Originally ,this market was called the Eurodollar market because the major deposits involved were dollar deposits located outside the united states ,chiefly in Europe .with the rise in importance of other currencies in this market ,"euro dollar" is often broadened to "euro currency " to include these other currencies .of course ,even the term Eurocurrency is inadequate because such deposits are now also located in financial centers outside Europe (particularly Singapore and Hong KONG )

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