The European Community's 1992 internal market programme and the UK government's recent issues of ECU Treasury bills have heightened interest in the ECU. This article examines the development of ECU banking business in Europe and, more particularly, in London and looks also at ECU bond and money markets. The article contains views and opinions expressed by a range of bankers involved in ECU markets in London. Among the principal findings are:
- The stability of the ECU in foreign exchange markets is a major attraction to borrowers and investors. The use of the ECU in banking and eurobond markets is now well established. The ECU accounts for two and a half per cent of banks' outstanding international lending and four per cent of the stock of international bonds.
- ECU banking business is primarily interbank. The ECU is not widely used for commercial and trading purposes, although in some countries, notably Italy and France, it has an established and growing role. Future growth will depend on how well the ECU meets demands from the non-bank sector.
- London is the main centre for issues of ECU eurobonds and the second largest centre for ECU banking business.
- The issue of ECU Treasury bills will make a contribution to the development of the use of the ECU in international financial markets and should enhance London's role as a major centre for ECU transactions.