Liquidity Adjustment Facility

AAA

DEFINITION of 'Liquidity Adjustment Facility'

A tool used in monetary policy that allows banks to borrow money through repurchase agreements. This arrangement allows banks to respond to liquidity pressures and is used by governments to assure basic stability in the financial markets.

INVESTOPEDIA EXPLAINS 'Liquidity Adjustment Facility'

Liquidity adjustment facilities are used to aid banks in resolving any short-term cash shortages during periods of economic instability or from any other form of stress caused by forces beyond their control. Various banks will use eligible securities as collateral through a repo agreement and will use the funds to alleviate their short-term requirements, thus remaining stable.

RELATED TERMS
  1. Event Risk

    1. The risk due to unforeseen events partaken by or associated ...
  2. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities. ...
  3. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  4. Liquidity Risk

    The risk stemming from the lack of marketability of an investment ...
  5. Liquidity

    1. The degree to which an asset or security can be bought or ...
  6. Monetary Policy

    The actions of a central bank, currency board or other regulatory ...
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. Forex Education

    Get To Know The Major Central Banks

    The policies of these banks affect the currency market like nothing else. See what makes them tick.
  4. Forex

    How do central banks acquire currency reserves and how much are they required to hold?

    A currency reserve is a currency that is held in large amounts by governments and other institutions as part of their foreign exchange reserves. Reserve currencies usually also become the international ...
  5. Economics

    Evaluate Your Investment Portfolio For 2015

    The beginning of a year is a good time to evaluate your investment portfolio and think about how to position it going forward.
  6. Personal Finance

    What precise measures are implemented in most monetary policies?

    Read about some of the precise measures implemented in most monetary policies, and learn why monetary policy is considered important.
  7. Economics

    Why Is The Price Of Oil In A Free Fall?

    The behavior of global financial markets this week could be characterized as “oil, roil, and turmoil,” since the price of oil is in a free fall.
  8. Economics

    What is the difference between monetary policy and fiscal policy?

    Examine some of the important and understated differences between how fiscal policy and monetary policy impact a nation's economy.
  9. Economics

    How does monetary policy influence inflation?

    Take a deeper look at how contemporary central banks attempt to target and control the level of inflation through monetary policy tools.
  10. Economics

    Under what circumstances will a government change its monetary policy?

    Learn about the kind of variables, including political and theoretical factors, that can bring about change in a government's monetary policy.

You May Also Like

Hot Definitions
  1. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  2. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  3. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  5. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  6. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
Trading Center