We already know that Eurodollar never leaves U.S. But then what do the media mean when they say bringing U.S. dollar offshore (eurodollar) onshore? Isn't it always onshore? (Let us omit the real physical cash)

Also, the Fed website says that both Eurodollar and Fed funds liability do not have reserve requirement. My question is how can banks in the U.S. hold eurodollar liability? I mean, eurodollar is defined to be U.S. dollar deposited off-shore or IBF. So doesn't that mean U.S. based banks cannot have Eurodollars by definitions? And since eurodollar does not leave the U.S., its borrowing in Eurodollar market in its off-shore branch is actually simply a transfer of Fed reserve from the lender's bank's U.S. bank to the borrower who is a U.S. based bank. Then the liability of the U.S. based borrower shows up as time deposit due to its off-shore branch. So I think this is how banks borrow from Eurodollars market. But the above question remain.

Any comment is appreciated.


  • $\begingroup$ I'm not quite sure what you are asking. First you say that Eurodollar never leaves the US, then you say it is never in the US. $\endgroup$
    – Jamzy
    Commented Nov 5, 2015 at 22:48
  • $\begingroup$ Where did I say it is never in the U.S.? only said how can U.S. based banks hold eurodollar because once eurodollar comes onshore, they are no longer eurodollar but rather dollar. $\endgroup$
    – Kun
    Commented Nov 5, 2015 at 23:18
  • $\begingroup$ "eurodollar is defined to be US dollar deposited off-shore". That condition can't be satisfied at the same time as "we already know that eurodollar never leaves US". $\endgroup$
    – Jamzy
    Commented Nov 5, 2015 at 23:20
  • $\begingroup$ Note that being deposited offshore does not mean it has to be actually off-shore. Consider some amount of dollar is transferred from Bank of America New York Branch to an offshore Bank of America branch, say its London Branch. The dollar per se never leaves the bank. What happens is Bank of America credit the deposit account London branch has with it, and London brach keep their dollar with the New york branch because they cannot deposit dollars at the Fed like the New York branch did. $\endgroup$
    – Kun
    Commented Nov 5, 2015 at 23:28
  • 2
    $\begingroup$ I started to answer this, but then it occurred to me that as of right now, you've asked 19 questions and accepted 4 answers, so it's probably better to save the effort of answering for someone who will take the time to show some appreciation. $\endgroup$ Commented Nov 6, 2015 at 4:47

1 Answer 1


Eurodollars can and do leave the US. They can be anywhere in the world: any bank outside the reach of the US Federal Reserve (henceforth "the Fed"). That's what makes them Eurodollars: they're US dollars in deposit accounts beyond the reach of the Fed.

That money is said to be "brought onshore" when it is transferred from a deposit account outside the reach of the Fed, into an account that is within reach of the Fed and its regulation / protection. This changes it from being a eurodollar to a dollar.

A US-based bank can have offshore banking subsidiaries and activities, and that's how it can hold eurodollars.

The whole point of a eurodollar is that it takes it outside the reach of the Fed.

  • $\begingroup$ Mostly right— one correction: the Fed doesn't guarantee deposits. $\endgroup$ Commented Nov 6, 2015 at 13:49
  • $\begingroup$ Consider a transfer of eurodollar deposit. How is that transfer going to settle? If they were dollars transferred between U.S. based banks, they settle using their reserve at the Fed. So for foreign banks, they have to settle this eurodollar transfer with something. And since that something is not the Fed, it has to be U.S. banks. i.e. Eurodollar banks hold their dollar at the U.S. based banks (maybe a deposit) and U.S. based banks hold their dollar with the Fed. Of course, new eurodollar can be created by these foreign banks due to multiplier effect. $\endgroup$
    – Kun
    Commented Nov 6, 2015 at 14:26
  • $\begingroup$ @dismalscience thanks, that's helpful. I guess they are guaranteed (perhaps partially, perhaps up to some limit), to deter bank runs, aren't they? Just by some entity other than the Fed? $\endgroup$
    – 410 gone
    Commented Nov 6, 2015 at 15:26
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    $\begingroup$ @EnergyNumbers, yeah, exactly— the Fed provides a liquidity backstop to bank holding company members, whose chartered bank subsidiaries typically have deposit insurance provided by by the FDIC. It's actually a useful distinction, as the deposit insurance touches the bank charter, not the holdco, which may have all kinds of things (like broker-dealers) other than the actual bank under it, while the liquidity support comes in at the holdco level. $\endgroup$ Commented Nov 6, 2015 at 15:42
  • $\begingroup$ And in my above comment's sense, the dollar deposit foreign banks keep with the U.S. banks act much like the reserve U.S. banks keep with the Fed. So in this sense, the dollar never left the U.S. It is all the pen of the bookkeeper that is expanding the amount of eurodollar deposit. Right? $\endgroup$
    – Kun
    Commented Nov 6, 2015 at 15:55

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