Chapter 8-International Investment Banking - International...

International Investment Banking

Euromarkets
 Euromarkets is the generic term used in international capital markets
for securities issued and held outside the issuer’s country of origin
 Bonds that trade in this market are called Eurobonds
 Euromarkets exist to facilitate cross border financings by corporations
and sovereign entities and were originally created in response to the
Cold War during the 1950s when the Soviet Union deposited their U.S.
dollars with European banks in Europe, outside of the control of the
U.S. government
 Due to restrictions on dollar lending activities to foreign companies and
ceiling limits on interest rates offered for deposits, U.S. banks also
moved significant dollar balances to their merchant banking offices in
Europe
 All of this gave rise to a very large amount of U.S. dollars deposited
mostly in London and has led to remarkable growth in the
Euromarkets, especially after OPEC countries began depositing U.S.
dollars received from oil sales outside of the U.S. during the 1980s

Characteristics of Eurobonds


London’s Financial Market
 One quarter of the world’s largest financial companies
have their European headquarters in London
 There are more than 550 banks and 170 global securities
firms that have London offices, more than any other city in
the world
 The London foreign exchange market is the largest in the
world, with average daily turnover in excess of $500
billion
