What are Eurodollars?

Sometimes it is beneficial for a person or organization to hold bank deposits denominated in US dollars (USD) in a bank that is outside North America. These dollars are referred to as Eurodollars . Despite the name, there is nothing necessarily about European. They are also not entirely related to the euro currency. A deposit in Japan or Argentina, denominated in dollars, would still be called the Eurodollar deposit. Most of these accounts are held in Europe, but many of them are held in East Asia and the Caribbean island countries.

The main advantage of Eurodollars is the fact that they are without any regulation imposed on US banks a federal reserve reserve that is the United States Central Bank. This means, among other things, that banks held by Eurodollar do not have to pay insurance premiums for deposits for these deposits. They are also without duty that are commonly known as a reserve requirement. Banks in the USA are legally recicoked to ensure a certain percentage of deposit at hand asCash and is allowed to borrow the rest. Being unlimited a reserve requirement allows multiple Eurodollars to lend to debtors.

The process by which Eurodollars are transmitted around the world can be complex, especially for someone who is not unknown with financing. However, one of the important things you remember this process is that while foreign banks may have deposits denominated in US dollars, Eurodollars will never actually leave the United States. The foreign bank with the Eurodollar deposit has this deposit in the US bank in the same way as if the customer of the bank, but this asset is balanced by the fact that the deposit is still owed to the person whose money is. In other words, the pure effect of Eurodollars on the balance sheet of a foreign bank is zero. In this sense, the deposit remains in the US all the time.

FIPR FIPS were created in the 1950s as an indirect result of the widespread ZHRancing possession of dollars after World War II. In addition to foreign deposits, some countries, including the Soviet Union, had deposits in US banks. After certain Cold War events, the Soviet government feared that its US assets would be frozen.

In order to protect against this possibility, some Soviet shares were transferred to the Soviet bank, which had a British charter, with the idea that the British bank would insert money into US banks. In this way, the Soviets could still have assets in the US and be protected from seizures by not being directly controlled by the Soviets, but by Britain. On February 28, 1957, the first Eurodollars were created in the amount of $ 800,000.