DEFINITION of 'Funding Operations'

  1. The process a government uses to swap out floating stock or short-term bonds for long-term bonds. Because floating stock does not guarantee payout or a fixed rate of interest, swapping it for funded debt (long-term bonds that carry a fixed rate of interest) introduces more stability into the government's financing of its national debt.
  2. The process a company uses to convert its capital funding from short-term to long-term debt instruments.

BREAKING DOWN 'Funding Operations'

In July of 2009, amid the lingering global credit crisis, Sheila Bair, Chairwoman of the Federal Deposit Insurance Corporation (FDIC) weighed in on the creation of a Financial Services Oversight Council to prevent a recurrence of the global economic meltdown and credit market freeze of 2007-2008. As part of the proposed Council's work, it was suggested that financial companies be subject to rules that would require them to issue short-term debt that would automatically convert to long-term debt under certain conditions such as during a liquidity crisis.

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