the Eurocurrency Market
Henry C. Wallich
U.S. monetary authorities have monitored the development of the Eurodollar market since its birth in the 1950s and its expansion into a market for several Eurocurrencies.
I would like first to address some general questions about the Eurocurrency market that are often asked. I will then turn to the possible need for better control of the market from a monetary policy standpoint. In addition, since concern is also expressed from time to time regarding the adequacy of supervision to assure the safety and soundness of banks participating in Eurocurrency banking, I shall briefly touch on this aspect.
The Eurocurrency market is an international banking market in bank deposits and loans that are denominated in currencies other than the currency of the country where the bank is located -- for example, dollar deposits and loans of banking offices in London. The phrase "Eurocurrency" developed because the market originated in Europe, chiefly as a market for Eurodollars. Eurodollars still account for about threequarters of the Eurocurrency market, with about half of the remainder being Euromarks. Also, some deposits in the market are denominated in pounds sterling, Swiss francs, and other major currencies. I will focus my comments on the Eurocurrency market as a whole with the reminder that at present it is largely, but not exclusively, a market in dollars.
What is now considered the Eurocurrency market extends beyond Europe to include banking activities in major industrial countries worldwide and in offshore banking centers such as the Bahamas, the Cayman Islands, Hong Kong, and Singapore. Still, the Eurocurrency market