Eurocurrency Markets are used by any banks which hold bank deposits of another countries currency, such as Japanese banks holding U.S. currency.   Eurocurrency Markets was created during World War II era by individuals who wanted to avoid regulatory cost and restrictions set forth by the government.   Some of these regulatory costs, which Eurocurrency banks, avoid include reserve requirements, requirement to pay FDIC fees, and rules or regulations that restrict competition among banks.    The minimum Eurocurrency short term loan is one million Eurodollars.   The largest Eurocurrency markets are located in London, New York, and Tokyo.    Eurodollar is the dominating currency traded in Eurocurrency markets, the U.S. Dollar makes up two thirds of Eurocurrency Market.   Central banks and regulators are concerned about Eurocurrency because they are considered “stateless money”, and they have very little regulations.   Which include restrictions: such as taxes, restrictions on capital movements, and exchange controls, which regularly apply to currency.   However bank deposits do not apply to Eurocurrency markets.   Banks utilize Eurocurrency markets to turn over profit; it is more profitable to store and move funds in Eurocurrency markets then the countries that are not involved in Eurocurrency.   Eurobanks tend to arbitrage with low cost of market and flip the funds earned by these deposits for a higher profit from the market, this practice is preferred by banks because of the lack of government restrictions placed on these loans.   This creates a problem if countries are trying to regulate their capital flows.   Eurocurrency spreads are generally narrower than a single countries currency spread due to their lack government regulations.   The lack of regulations benefits Eurobanks allowing them to offer a higher interest rate of return to depositors.   Eurobanks utilize these deposits to their advantage because they are able to lend more money out then regular banks. REFERENCE:http://www.ny.frb.org/education/fx/role.html#concerns