EURO BANKING AND EURO CURRENCY

MARKET ( compared to European Central

Bank and Euro)
Prepared by,
Group 5
Achu Anna Roy
Aiswarya Jhonny
Aparna Biju
Tesaa Teddy
Vishnu Shankar
Vishnu C Vijoy
Euro Banking

• Euro banking is financial intermediaries that handling services for

Eurocurrency market.

• It has global services for each branches and customers

• Euro banking can help Europe market, and bring effectively working.

• And the purpose of euro banking is to provide an opportunity for

members to improve for European currency financial markets.
 EUROPEAN CENTRAL BANK
• European Monetary Union (EMU)is the agreement among the participating member
states of the European Union to adopt a single currency and monetary system.

• The European Monetary Institute (EMI) was the forerunner of the European Central
Bank(ECB).

• The ECB is the central bank for Europe’s single currency, the euro.

• It was established as the core of the Euro system and the European system of the
central bank.

• It has legal personality under public international law.

ADOPTION OF THE EURO

• Euro is the official currency of the European Union.

• 1 January, 1999 Europe has had a new currency, the euro.
• On that date the euro replaced the national currencies of 11 countries.
• Eleven member states have adopted it collectively known as Eurozone.
(Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland,
Italy, etc.)
• On 1 January 2001 it also replaced the national currency of Greece.
HISTORY
• THREE STAGES TO ECONOMIC AND MONETARY UNION
• Stage 1
1 July 1990-Abolition of all restrictions on the movement of capital
• Stage 2
1 January 1994- Establishment of the European Monetary Institute
• Stage 3
1 January 1999- Fixing of conversion rates ECB responsible for the
monetary policy
BENEFITS OF EURO
1.Low interest rates due to high degree of price stability

• The euro is as stable and credible as the best performing currencies .

• Previously used in the euro zone countries .

• This has established an environment of price stability in the euro area

exerting a moderating influence on price and wage –setting.
Continued…
2. More price transparency

•Payments can be made with the same money in all countries of the euro
area, making travelling across these countries easier.

•Price transparency is good for consumers since the easy comparison of

price tags makes it possible for consumers to buy from the cheapest
supplier in the euro area.
Continued…
3. Removal of transaction costs
The launch of the euro on 1 January 1999 eliminated foreign exchange transaction
costs and thus made possible considerable savings. Within the euro area, there are
no longer any costs arising them:

• Buying and selling foreign currencies on the foreign exchange markets

• Protecting oneself against adverse exchange rate movements

• Cross-border payments in foreign currencies, which entail high taxes

• Keeping several currency accounts that make account management more difficult
4. No Exchange Rate Fluctuations

• With the introduction of euro foreign exchange risk disappeared.

• In the past these rates costs and risk hindered trade and competition
across the borders.
EURO CURRENCY MARKET

• The money market for borrowing and lending currencies

that are held in the form of deposits in banks

located outside the countries where the currencies

are issued as legal tender.

Eurocurrency market - As a market
based in Europe
• It comprises of a web of international banks and money brokers, which is
engaged in the borrowing and lending of foreign currencies such as US dollars,
Japanese Yen, Swiss France etc. outside their countries of origin.
• The main instrument used in the euro currency market to finance long
term investment is the eurobond.
• A form of fixed interest security which is denominated either in a single currency
or is syndicated with a lead bank arranging with other banks a multi-currency loan
package.
• Depositors of funds in the Eurocurrency market include :

commercial banks

Companies

central banks

• While borrowers for the most part are industrial and financial
companies, particularly multinational enterprises.
Features of Eurocurrency market
• International market:

 As it accepts deposits and gives credit in currencies throughout the

world.

• Independent market:

 free and independent market which does not function under the
control of any monetary authority.
Continued…
• Wholesale market:

different currencies are bought and sold usually above $1 million .

• A unique interest rate system:

deposit rates relatively high but lending interest rates are relatively
low.

because does not subject on the maximum interest rates of deposits.

depositors and borrowers have same attraction for European market.

Continued…

• Competitive market:

 supply and demand for currencies depends on interest rate changes of

Euro-banks.

• Short-term market:

deposits in different currencies are usually accepted for a period

ranging from a few days to a year and interest is paid on them.
Continued…
• Inter-Bank market

Euro-banks borrow and lend dollars and other Euro-currencies from

each other.