The types of eurocurrency loans available are:
(a) Fixed Interest loans, which is usually a medium term loan of up to 5 years. The borrower knows in advance what his interest payments will be.
(b) Roll over (variable interest rates) loans. These are loans whereby the bank agrees to provide finance to the borrower for a given period but the interest rate on the loan is subject to renegotiation at pre-arranged intervals of every 3 or 6 months.
(c) Stand by credit: This is an overdraft facility offered by a bank to its customers in a eurocurrency. The bank charges an agreed interest rate together with a commitment fee of about 1% for funds made available to the customer under the credit, but which he then fails to draw.
(d) Syndicated credit, which are large Eurocurrency loans put together for a single customer by a syndicate of banks, usually for a longer term than the Eurocurrency loans. The customer approaches a bank for a loan and if the bank is unable or unwilling to provide all the loan itself, it can arrange, by means of a placement memorandum, for a number of other banks to contribute to the loan as a member of a syndicate. The bank which sets up the syndicate is known as the managing bank.
(e) Euro commercial paper (or euro notes): This is a short-term financial instrument:
i. Issued in the form of unsecured promissory notes with a fixed maturity of up to one year
ii. Issued in bearer form
iii. Issued on a discount basis (so the rate of interest) on the commercial paper is implicit in its sales value)
The eurocommercial paper is denominated in any currency - usually a hand currency.