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Int’l Banking & Money Market. “Money Markets” are actually for short-term loans, which are almost like cash money. International Banking. Reasons for Banks Becoming Int’l. Reasons (continued). Types of Int’l Banking Offices. Offshore Banking Centers. Capital Adequacy. Basel Accord.
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Int’l Banking & Money Market “Money Markets” are actually for short-term loans, which are almost like cash money.
International Money Market • Eurocurrency Market • Eurocredits (borrowing/lending) • Forward Rate Agreements • Euronotes (loans underwritten by banks) • Eurocommercial Paper (unsecured loans)
Forward Rate Agreements (FRAs) • When maturities of eurocredits and eurodeposits are mis-matched, there is interest rate risk. • FRAs are contracts where the buyer pays the seller when the interest rate falls below a limit; or the other way around. • The FRA market is huge ($13+ trillion in 2004).