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. Treasury Automated Auction Processing ...

    A computer network system developed by the Federal Reserve (and ...
  6. Primary Dealer

    A pre-approved bank, broker/dealer or other financial institution ...
Related Articles
  1. The Federal Reserve
    Economics

    The Federal Reserve

  2. How The U.S. Government Formulates Monetary ...
    Personal Finance

    How The U.S. Government Formulates Monetary ...

  3. How The Federal Reserve Manages Money ...
    Personal Finance

    How The Federal Reserve Manages Money ...

  4. What is a liquidity squeeze?
    Investing

    What is a liquidity squeeze?

Hot Definitions
  1. Return On Sales - ROS

    A ratio widely used to evaluate a company's operational efficiency. ROS is also known as a firm's "operating profit margin". ...
  2. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  3. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  4. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  5. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  6. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
Trading Center