Money markets

Money markets consist of the discount, inter banks, certificates of deposit and local (municipal) authority and euro currency markets.

The euro currency and inter bank markets are wholly international, whereas the other markets listed a re largely domestic. In the 1950s, the Soviet Union used the Moscow Narodny bank in London for US dollar deposits. The euromarket grew out of the euro dollar market later in the 1950s, after US regulators imposed interest rate ceilings on deposits and restrictions on US firms using dollars to fund the establishment of overseas subsidiaries.

This increased the use of eurodollar deposits and loans in London, with in other countries with exchange and other capital controls, eurocurrency markets were a w ay of getting around them.

Although many of these regulations have long since been abandoned, the euromarkets continue to thrive. Interbank markets exist because, at the end of a trading day, banks may find themselves long on deposits or short on loans. The interbank market allows surplus banks to make overnight deposits at other deficit banks.

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