This article, which has been prepared mainly by J G Ellis of the Bank's International Division describes and analyses the eurocurrency inter-bank market.
- The inter-bank portion of the euromarkets is now worth several hundred billion dollars and represents two thirds of the total market. It performs a necessary and valuable role in linking non-bank depositors and borrowers.
- This inter-bank market is important to all eurobanks and vital to many of them. Some smaller banks tend to rely almost completely on this market to fund their offshore operations.
- The characteristics of different categories of banks affect their involvement in the market. In the UK segment of the market, for example, American banks are significant suppliers of inter-bank funds, while the consortium banks are net borrowers.
- Fluctuations in inter-bank activity do not appear to be closely related to external influences such as the strength of the dollar or the level of interest rates.
- Some features of the market could in some circumstances cause difficulty, but there is no evidence that they exercise a destabilising influence.
Eurobanks and the inter-bank market