are therefore calling for non - banks to be excluded from the issuance or administration of electronic money units. the european central banks made this approach concerning prepaid cards public in the 1994 european monetary institute ( emi ) report. at all events, the creation of fully private systems such as “ microsoft money ” can only be successfully regulated by a worldwide cooperation on the part of governments and central banks. the introduction of different electronic cashless payment instruments has not reduced the high demand for cash. this is partially due to inadequate financial systems and the fear of inflation in foreign countries, such as in east europe or south america. thus, the usd currency in circulation abroad is assumed to be about 70 % and, for the dem currency, to be approximately 30 % of the total amount in circulation. an increasing consolidation in the respective countries might reduce international demand. but retailers, for instance, still consider cash payments to have comparative commercial advantages over cashless payment and combined high bank fees. the criticism that central banks subsidise the use of cash is not valid. the dem 260 million or so in bank notes have to be “ bought ” from the bundesbank. assuming an interest rate for refinancing of 3 %, this would result in a benefit dem 7. 8 billion per year. the high demand for cash also supports the transformation process of the central banks ’ interest policy. therefore, central banks do not consider it necessary to push back cash demand beyond the already existing impact of technological developments. progress in this field is fully accepted by them. with regard to the replacement of cash, retail transactions in coins of all denominations and in lower value banknotes at vending machines or service terminals are most likely to be replaced by electronic payment means. this evolution might even be fostered by the delayed changeover to the euro cash. let us now take a look at an important driving force in more detail : stage three of emu. implementation of the single monetary policy will then require a single money market in the participating countries and secure and efficient payment and settlement systems. therefore, the central banks, in particular, are paying interest to interbank and commercial large - value payments. for that reason, they are setting up target, the trans - european automated real - time gross settlement express transfer system, which will link the national rtgs systems in europe. non - participating countries can also be connected to target. monetary policy transactions have to be fully collateralized. securitisation will also be needed for payment

difference in deposit and lending rates. however, increased competition may lead to a further decline in the interest rate margin, thus not allowing banks to suffer from higher costs from isolating the real sector from a contractonary monetary policy. the impact of monetary policy will consequently be amplified. however, growing bond and equity markets will eventually provide companies with additional financial facilities. although, in practice, financial constraints seem to be given by the amount of bank lending for most small and medium - sized enterprises, 56 the favourable development of corporate bonds and of financing via the “ new markets ” may lead to a better substitution between both sources of funds. this reduces the importance of bottlenecks created by a shortage of bank credits and dampens the impact of the bank lending channel. monetary impulses might be transmitted differently on more expectation - driven markets, which are largely influenced by real - sector developments. for example a restrictive monetary policy may not directly lead to a reduction of financing facilities for companies, but might rather influence the expectations of the future direction of real activity in the economy. this, in turn, might worsen the prospects for the company ’ s future earnings and therefore reduce the returns of going public or bond issues. finally, monetary expansion or contraction can be strengthened via the evaluation of collateral, which partly determines the creditworthiness of borrowing companies or households. the cost and amount of loans are assumed to depend on the net present value of collateral, which again is inversely related to the short - term interest rate. whereas this balance sheet channel seems to be particularly strong in bank - dominated financial systems, 57 it is not clear how changes on capital markets have affected the strength of this financial accelerator of the standard interest rate channel of monetary policy transmission. a rise in the share of tradeable assets in the balance sheets of companies as well as in the net wealth of private households enables additional borrowing with rising asset prices, whereas the creditworthiness of debtors is restricted by falling stock and property prices. since tradeable assets react more readily to changes in monetary policy, its impact could be reinforced through revaluation of collateral, provided that asset prices move in the “ right ” direction, i. e. decline with a monetary contraction. on the other hand a shift towards a more market - oriented financial system may weaken the transmission process of monetary policy over banks ’ balance sheets. 58 as capital markets grow and banks become increasingly exposed to competiton, financial instruments are becoming eligible as closer substitutes and also more tailored