International financial markets can develop anywhere, provided that local regulations
permit the market and potential users are attracted to it.
International Capital Markets, also called Euro-markets, are the markets on which Euro-
currencies, Euro-bonds, Euro-equity and Euro-bills are exchanged. International
financing in the form of short-, medium- or long-term securities or credits has become
necessary for the international economy. Financing techniques have diversifies, volumes
dealt have increased and the process is continuing to grow.
Euro-debt or Euro-credit is medium-term loans (with variable rate linked to Euro-
currency deposits and accorded by an international bank syndicate). The following
paragraphs give a brief description of different aspects of Euro-credit markets.
The major lending banks in Euro-credit market are Euro-banks, American, Japanese,
British, Swiss, French, German and Asian (specially that of Singapore) banks, Chemical
Bank, JP Morgan, Citicorp, Bankers Trust, Chase Manhattan Bank, First National Bank
of Chicago, Barclay’s Bank, National Westminster, Credit Lynonnais, BNP, etc. Among
the borrowers, there are banks, multinational groups, public utilities, government
agencies, local authorities, etc.
When a borrower approaches a bank for Euro-credit, a formal document is prepared on
behalf of potential borrowers. This document, inter-alia, contains the principal terms and
conditions of loan, objectives of loan and details about the borrower.
Before launching a syndication, the approached bank decides primarily, in consultation
with the borrower, on a strategy to be adopted, i.e., whether to approach a large market or
a restricted number of banks to form the syndicate.
Each of the banks in syndicate lends a part of the loan. The duration of this operation is
normally about 6 to 8 weeks. Several clauses as below may be introduced in the contract
of Euro-debt:
- Pari-passu clause that prevents the borrower from contracting new debts that
subordinate the interest of lenders; - Exchange option clause that allows the withdrawal of a part or totality of loan in
another currency; - Negative guarantee clause that commits the borrower not to contract other debts
that subordinate the interest of lenders.
- Characteristics of Euro-credits
A major part (more than 80 per cent) of the Euro-debts is made in US dollars. The
second (but far behind) is pound sterling followed by ECU, Deutschmark, Japanese yen,
Swiss franc and others.