questions that have not been fully resolved. Because the Euromarkets is a fluid and
evolving market, certainly the most dynamic deposit dealing market in the world, many
of these questions probably will never be finally settled; in some respects this is probably
for the best since the innovative capacity of the market has depended greatly on its
relative freedom from bureaucratic regulations.
Another important feature of the market in which it differs from domestic markets
is that it is a purely wholesale market. Although some banks in the United States allow
some individual customers to place funds through them into the Euromarkets with a view
to obtaining a better return, trading in the Euromarkets proper is typically done in blocks
of $1 million and upward. The major advantage, again, is the relative freedom from
regulation in a wholesale market compared with the retain banking market, which is
typically heavily regulated in many countries.
Finally, another significant difference between the Euromarkets and many
domestic deposit markets is that the Euromarkets is almost exclusively concerned with
matched deposit dealing. That is, each deposit (liability) of an international bank will
tend to be matched by an asset (usually a deposit in another bank) of the same currency
and of similar maturity. Deliberate mismatches might be incurred with a view to making
a profit, but the book of each bank as a whole will be matched within certain periods.
Hence loans are typically made for a specified period and funded by a deposit of a similar
period. This is very different from a domestic market where typically large amounts of
lending are done on the basis of a prime (or base) rate, with these loans being funded day
to day in the domestic overnight or short-date money market, or from normal customer
deposits.