International money markets: eurocurrencies

Eurocurrencies are international markets for short-term wholesale bank deposits and loans. They emerged in Western Europe in the late 1950s and rapidly reached a global scale. A Eurocurrency is a form of bank money: an unsecured short-term bank debt denominated in a currency (for instance, US dollars) but issued by banks operating offshore, in a geographical location or a legal space situated outside of the jurisdiction of the national authorities presiding over that currency (for instance, the Federal Reserve). In Eurocurrency markets, banks intermediate mainly between foreign residents. They borrow funds by "accepting" foreign currency deposits and lend foreign currency-denominated funds by "placing" deposits with other banks, by granting short-term loans or investing in other liquid assets. Historically, Eurodollars accounted for the largest share of Eurocurrencies, although other international currencies (Deutsche Marks, Japanese yens, and especially Euros since 1999) played an important role. Eurocurrency markets were a manifestation of financial integration and interdependence in a globalizing economy and performed critical functions in the distribution and creation of international liquidity. At the same time, their fast growth was a recurrent source of concerns for central bankers and policymakers due to their implications for macroeconomic policies and financial stability. This chapter analyzes different aspects of the historical development of Eurocurrency markets and their role in the international monetary and financial system. The first part discusses theoretical interpretations, presents estimates of markets' size, describes their structure, and explains the determinants of their growth. The second part analyzes the spread between Eurodollar rates and other US money market rates, the role of arbitrage, the evolution of risk factors, and the causes of historical episodes of stress and contagion in the interbank market. The last part discusses political economy issues, such as the role of governments and market forces in the emergence of Eurodollars in the 1950s and the failed attempts to impose multilateral controls on Eurocurrency markets in the 1970s

South Africa's financial sector ten years on: performance since democracy

The South African financial sector, defined as the banking, insurance and securities industries, has contributed to the growth of the economy since democracy in terms of growth in assets and value added, although its provision of financial services to the poor has been less impressive. The article takes a broad approach to evaluating the performance of the sector in terms of the balance between stability and innovation, and the balance between efficiency and allocation of resources. While the financial system has proved to be stable, innovation has generally been for the high-value, contested market. In terms of cost efficiencies and provision of services to small businesses and poorer consumers, there is room for improvement. The performance of the sector is linked to the regulatory regime, and the extent to which the sector will be able to improve its allocative performance will be influenced by mooted regulatory changes.

Regulatory Failure in the Subprime Crisis

Banking crisis, Monetary policy, E58, G21,