Under these circumstances, and with a steep yield curve, a banker’s natural inclination might be to shift the credit mix and extend the maturity of assets in an attempt to bolster asset yields. To some extent such actions have been taken. Residential mortgage loans and pass-through securities have increased from 17.5 percent of assets in 2000 to 20 percent in 2003.
Companies which trade principally with European counterparties may be inclined to invoice and pay in euros. If the euro is going to be widely used in international trade transactions, exporters and importers within the European Union will no longer be exposed to exchange rate risks nor have to hedge against such risks.