European Capital Markets with a Single Currency

By Jean Dermine; Pierre Hillion | Go to book overview

Table 2.8. Daily turnover and collateral in the UK CHAPS, 1994 (ECU bn.)
Reserves with central bank 1.8
Collateral 11.1
Intraday liquidity 12.9
Daily turnover 128.9
Bank deposits 648.1
Balance sheet total 930.3
Sources: Folkerts-Landauet al. ( 1996),
OECD ( 1996).

private sector alternatives, such as the net payment system run by the ECU Banking Association, which has a much lower demand for collateral.

What will be the size of the flows for which TARGET might be used? Cross-border payment flows are usually much smaller than domestic ones. Trade with the EU amounts to about 10 per cent of UK GDP. Assuming a similar proportion applies to turnover in payments between the UK and the EU, cross-border transactions in the EU should be around euro 13 billion daily. (This implies an annual turnover of about euro 2,860 billion: UK-EU trade amounts to about euro 100 billion; the ratio of 30 of turnover to trade is within the range observed in other currency markets.)

These calculations suggest that the additional collateral required would be about ECU 1.3 billion. This collateral would be remunerated at market rates. Folkerts-Landau et al. ( 1996) estimated that the upper limit of the opportunity cost of pledging collateral is 0.25 per cent, a consequence of the fact that eligible securities are high quality and very liquid but no longer available to the bank for other purposes. This would imply that the cost of pledging additional collateral would be only ECU 3.25 million per annum ( ECU 13 billion x 0.1 x 0.0025) for the entire UK banking system! This would be the maximum under a scenario of double collateral and still the sum is negligible if compared to gross income, profits, costs or any other indicator of the size of the UK banking system. Similar considerations apply to the other potential 'out' countries.


5. Conclusions: Implications for Capital Markets

EMU will be a further quantum step in the integration of European capital markets, although they will remain different for some time to come. Within the US monetary union it does not make sense to speak of different regional capital markets. Nothing differentiates the New York from the Californian market, except that some market participants are located (and deal) in New York and some others deal primarily in California. This will not be the case in Europe. Even after the introduction of the euro capital markets will retain a strong 'national' flavour. This does not apply to all market segments, but to most of the important ones. There are many reasons for this. They can best be observed by distinguishing between the retail and the wholesale levels.

-71-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this book

This book has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this book

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited page

Bookmark this page
European Capital Markets with a Single Currency
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen
/ 364

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.