What is Eurocurrency?

It’s a common misconception that Eurocurrency has to be the deposit of foreign currency in a European bank. In fact, Eurocurrency is considered a deposit any currency in an international bank located in a different country from the deposited money.

Eurocurrency got it’s start back in the Soviet communist days. Back then, Communist countries were afraid to deposit their US dollars in US banks for fear their assets would be frozen our stripped (due to anti-Communist) sentiment. They chose to deposit their US dollars in a French bank whose telex address happen to be EURO-BANK. That’s why we call it Eurocurrency!

Since the advent of the European Union and the euro, however, we have started to call Eurocurrency simply international currency. Also, instead of the term Eurobank, we now use the term prime bank. I think this makes more sense.

When a Eurobank, or prime bank, makes a short to medium-term loan, we call this appropriately a Eurocredit. These loans would be loans in currencies other than the currency of the home country of the lending bank.