Regulations and Domestic Policy Regulatory History In the 1970s, regulating the eurocurrency market became a key priority for policymakers globally. This was because the growth of Eurodollars forced domestic banks to participate in offshore banking in order to stay competitive against rapidly growing foreign banks. Offshore banking allowed domestic banks to avoid the rising costs and restrictions resulting from national banking regulations. National governments struggled to monitor money supply and accurately predict economic outcomes in the global financial system due to unregulated and regulated financial markets existing in parallel. Since this realisation, governments have attempted various regulatory measures such as imposing reserve requirements, ceilings on interest rates and extending supervisory authority into the unregulated eurocurrency market. Overall, critics today maintain that regulation in offshore banking as a whole remains largely insufficient. Usage of Reserve Requirements Reserve requirements refer to a particular predetermined amount of cash which banks must have on-hand for the purpose of meeting liabilities in the case of sudden withdrawals. In the case of eurocurrency, this is a crucial regulatory measure with the high risk of bank runs. Typically, the central banks of individual nations enforce reserve requirements for its commercial banks. For example, the US central bank - The Federal Reserve, requires commercial banks to retain money in reserves against their commitments to depositors under the Monetary Control Act 1980. However, little progress has been made in imposing reserve requirements on eurocurrency deposits as nations continually fail to reach consensus over eurocurrency reserve amounts. Thus, it is the extension of national reserve requirements to the eurocurrency markets that has some level of mitigation between eurocurrency deposits and domestic bank balances. Eurocurrency and Interest Rates A key attraction for eurocurrency deposits are favourable interest rates for both lenders and borrowers relative to domestic interest rates. However, studies including the Granger causality test show that the “stickiness” of eurocurrency interest rates only exists with respect to the Eurodollar market. Interest rates for other eurocurrencies often move in parallel with corresponding domestic interest rates, seen as a control used by national governments to limit international capital flows. Eurobanks A eurobank is a financial institution anywhere in the world which accepts deposits or makes loans in any foreign currency. Eurocredits Eurocredit is a loan whose denominated currency is not the lending bank's national currency. A eurocredit loan would be made by a U.S. bank to a lender requiring a denominated currency