Eurocurrency is the domestic
currency of a country that is deposited in another country. It may be deposited in a branch of a
domestic bank, a foreign bank or a special “
offshore” facility called an
international banking facility (
IBF). They can have
maturities ranging from overnight up to a year. Deposits for longer than three months are called Euro Certificates of Deposits (Euro CD’s). Eurocurrencies serve two purposes: 1) they are an
efficient and
convenient market device for holding excess
liquidity and 2) they provide a major source of
short term financing for
working capital,
imports and
exports.
While Eurocurrency loans generally have a maturity of less than one year, loans of one year or longer are also available in Eurocurrencies. These loans are called Eurocredits.