ABSTRACT
This chapter examines the changing nature of international financial markets and the financial service industry itself. Market and product interpenetration in the international financial service sector has been proceeding at a ferocious rate, driven by rapid financial innovation, securitization of international capital flows, and continued evolution of offshore capital markets. Financial markets and the financial service sector itself form one of the most structurally complex industries in the world economy. One measure of change is the wave of innovation in both financial products and financial markets. The Eurocurrency market, a market for deposits denominated in a currency different from the indigenous currency of the financial center, began to take shape in the early 1960s. Differential regulation was the principal incentive for the market to take shape. The Eurobond market developed at approximately the same time as the market for Eurocurrency deposits. The trend toward securitization in preference to traditional bank lending is also visible in the international markets.
