Eurodollar

View more Business & Finance videos

For more information on Eurodollar, visit Britannica.com.

Dollar denominated deposit in a bank or bank branch outside the United States. Deposits in an International Banking Facility in the United States, permitted since 1981 for both domestic and foreign banks, and in Asian financial centers are also Eurodollars. However, the majority of Eurodollar deposits are still found outside the United States, primarily in London based banks, where there is an active secondary market for large Eurodollar deposits. Banks holding Eurodollar deposits also use them to make loans, denominated in dollars, to corporations, foreign governments and government agencies, domestic U.S. Banks, and others.

A U.S. dollar held as a deposit in a European commercial bank. Eurodollars were created after World War II by United States foreign defense and aid expenditures.
Since the dollar was backed by gold, it became a popular reserve currency in Europe and among all the trading partners of the United States.

U.S.-dollar denominated deposits at foreign banks or foreign branches of American banks. By locating outside of the United States, eurodollars escape regulation by the Federal Reserve Board.

Investopedia Says:
Originally, dollar-denominated deposits not subject to U.S. banking regulations were held almost exclusively in Europe; hence the name eurodollars. These deposits are still mostly held in Europe, but they're also held in such countries as the Bahamas, Canada, the Cayman Islands, Hong Kong, Japan, the Netherlands Antilles, Panama, and Singapore. Regardless of where they are held, such deposits are referred to as eurodollars.

Since the eurodollar market is relatively free of regulation, banks in the eurodollar market can operate on narrower margins than banks in the United States. Thus, the eurodollar market has expanded largely as a means of avoiding the regulatory costs involved in dollar-denominated financial intermediation.

Related Links:
Corporate eurobonds simplify expansion for MNCs, though there are a few more hoops to jump through. The Ins And Outs Of Corporate Eurobonds

For a list of words related to Eurodollar, see:

• Money, Currency, and Denominations - Eurodollar: U.S. dollar deposited in or credited to European bank

---