Lending Facility

AAA

DEFINITION of 'Lending Facility'

A mechanism that central banks use when lending funds to primary dealers. Lending facilities provide financial institutions with access to funds in order to satisfy reserve requirements using the overnight lending market. Lending facilities are also used to increase liquidity over longer periods such as by using term auction facilities.

INVESTOPEDIA EXPLAINS 'Lending Facility'

Lending facilities were developed to enhance efficiency when depository institutions require capital. Central banks often accept a variety of assets as collateral from financial institutions in exchange for supplying the loan. These lending facilities can take the form of term auction facilities, term securities lending facilities, treasury automated auction processing systems (TAAPS) or the overnight lending market.

RELATED TERMS
  1. Overnight Rate

    The interest rate at which a depository institution lends immediately ...
  2. Federal Reserve Bank

    The central bank of the United States and the most powerful financial ...
  3. Offtake Agreement

    An agreement between a producer of a resource and a buyer of ...
  4. Ben Bernanke

    The chairman of the board of governors of the U.S. Federal Reserve. ...
  5. Liquidity

    1. The degree to which an asset or security can be bought or ...
  6. U.S. Treasury

    Created in 1798, the United States Department of the Treasury ...
RELATED FAQS
  1. How do central banks inject money into the economy?

    Central banks use several different methods to increase (or decrease) the amount of money in the banking system. These actions ... Read Full Answer >>
  2. What is a liquidity squeeze?

    A liquidity squeeze occurs when a financial event sparks concerns among financial institutions (such as banks) regarding ... Read Full Answer >>
Related Articles
  1. Economics

    The Federal Reserve

    Few organizations can move the market like the Federal Reserve. As an investor, it's important to understand exactly what the Fed does and how it influences the economy.
  2. Personal Finance

    How The U.S. Government Formulates Monetary Policy

    Learn about the tools the Fed uses to influence interest rates and general economic conditions.
  3. Personal Finance

    How The Federal Reserve Manages Money Supply

    Find out how the Fed manages bank reserves and this contributes to a stable economy.
  4. Personal Finance

    Overdrafting

    An overdraft occurs when money is withdrawn from a bank account in an amount that exceeds the funds available in the account. Banks often permit this as a form of short-term loan to the account ...
  5. Trading Strategies

    Eyeing a Loan? Consider Skipping the Banks

    Peer-to-peer lending platforms, such as Lending Tree, Lending Club and Prosper, offer borrowers newfound leverage. Here's a look.
  6. Personal Finance

    What's a Commercial Bank?

    A commercial bank is a type of financial institution that accepts deposits, offers checking account services, makes business, personal and mortgage loans; and offers basic financial products ...
  7. Personal Finance

    What's a Bank Rec?

    A bank reconciliation statement is a monthly statement from the bank showing all activity in an account during the previous month, along with the end-of-month balance. An individual or company ...
  8. Investing

    What's Investment Banking?

    An investment bank is a special type of bank involved in a variety of large and complex financial services for major institutions.
  9. Trading Strategies

    Consider The Season On Trading Day

    Calendar and clock bias, better known as seasonality, is a frequently misunderstood concept that exerts a huge influence on the ticker tape.
  10. Economics

    Sanctions & Falling Oil Prices Hit Ruble Hard

    Russia, through its aggressive actions, has brought upon itself sanctions which, coupled with falling oil prices, have adversely impacted its economy.

You May Also Like

Hot Definitions
  1. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  2. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  4. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  5. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  6. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
Trading Center