Lending Freeze

AAA

DEFINITION of 'Lending Freeze'

A period of time when banks either do not have excess money to loan or implement strict rules regarding loan qualification so that less lending is approved. This is a protective measure by the banks to ensure that they do not run out of capital or expose themselves to increased risk. The result is that borrowers have less access to loans, and therefore are unable to secure a mortgage, an automobile loan or business loans, which can negatively impact hiring and expansion.

INVESTOPEDIA EXPLAINS 'Lending Freeze'

Lending freezes occur when banks need to protect against further losses. Banks may not halt lending altogether, but will become more selective when it comes to handing out loans. The credit crisis of 2007-2008 forced companies to make difficult choices; without access to loans, many corporations were forced to make large-scale layoffs, while individuals had very little chance to secure credit.

RELATED TERMS
  1. Build America Bonds - BABs

    Taxable municipal bonds that feature tax credits and/or federal ...
  2. American Recovery And Reinvestment ...

    An act initiated and signed by U.S. President Barack Obama in ...
  3. Credit Crisis

    A crisis that occurs when several financial institutions issue ...
  4. Credit Risk

    The risk of loss of principal or loss of a financial reward stemming ...
  5. Bailout

    A situation in which a business, individual or government offers ...
  6. Asset Liquidation Agreement (ALA)

    A contract between the Federal Deposit Insurance Corporation ...
RELATED FAQS
  1. How did the financial crisis affect the oil and gas sector?

    The financial crisis had a negative impact on the oil and gas sector as it led to a steep decline in oil and gas prices and ... Read Full Answer >>
  2. What is the difference between a bank's liquidity and its liquid assets?

    A company's liquid assets can easily be converted into cash to meet financial obligations on short notice. Liquidity is the ... Read Full Answer >>
  3. How are risk weighted assets used to calculate the solvency ratio in regulatory capital ...

    Risk-weighted assets are the denominator in the calculation to determine the solvency ratio under the provisions of the Basel ... Read Full Answer >>
  4. What happens when a company defaults on its commercial paper obligations?

    As a practical matter, the Issuing and Paying Agent, or IPA, is responsible for reporting the commercial paper issuer's default ... Read Full Answer >>
  5. Can small investors buy collateralized mortgage obligations (CMOs)?

    Collateralized mortgage obligations (CMOs), which are pools of mortgage-backed securities (MBS), are available to smaller ... Read Full Answer >>
  6. In what ways does Bayesian probability support the probability default model when ...

    During the European debt crisis, several countries in the Eurozone were faced with high structural deficits, a slowing economy ... Read Full Answer >>
Related Articles
  1. Economics

    Lessons Learned: Comparing The Japanese And U.S. Bubbles

    Find out what the Japanese and U.S. bubbles can tell us about recovering from financial chaos.
  2. Entrepreneurship

    How Microfinance and Investment Banking Compare

    Investment banks and microfinance institutions (MFIs) provide similar services, but the clients they serve and the incentives that motivate them are very different.
  3. Economics

    Understanding Term Loans

    A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
  4. Investing

    Market Crisis: Does Diversification Still Work?

    If you still aren’t sold on the benefits of international diversification, you may object that: Diversification didn’t work during the last market crisis.
  5. Entrepreneurship

    What Is Microlending And How Does It Work?

    Microlending can produce great return on investment for the lender while benefiting borrowers who wouldn't otherwise secure funding.
  6. Investing Basics

    The Dodd-Frank Wall Street Reform Act

    The Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly called Dodd-Frank, was passed in 2010. The goal of the act is to prevent another great recession like that of 2008, which ...
  7. Investing

    3 Major Risks For Annaly’s Investors

    Thanks to its double-digit dividend yield, Annaly Capital Management has long been a favorite among income-seeking investors.
  8. Credit & Loans

    Which Is One Of The Nation’s Safest Banks?

    While there's no such thing as a completely safe bank stock, it's hard to find one that comes closer to the mark than New York Community Bancorp .
  9. Economics

    Afraid Of A New Financial Crisis?

    It may be time for the U.S. to adopt a model for financial companies that better deters risky financial behavior.
  10. Investing Basics

    Undervalued Franchises: The Best Choice?

    Searching for an undervalued franchise? Here's a quick guide to what's hot and what's a good bet.

You May Also Like

Hot Definitions
  1. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  2. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  3. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  4. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  5. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  6. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
Trading Center