Lombard Rate

AAA

DEFINITION of 'Lombard Rate'

The rate charged to banks by the German central bank for collateralized loan obligations. A Lombard rate is an interest rate German banks use as upper limit daily money rates. This rate mainly applies to international equities not so much United States equities or equities from other countries. Prior to the Euro, Germany had the authority to control its own monetary policy and raise or lower the Lombard rate, but this no longer holds true.

INVESTOPEDIA EXPLAINS 'Lombard Rate'

This rate is similar to the discount rate used by the Federal Reserve Bank in the United States. The rate is usually 0.5% above the Bundesbank discount rate. Bundesbank is the central bank of Germany. In Germany, this rate is called the lombardsatz and it is considered a financial market indicator in that country. Also referred as the rate of interest charged on a Lombard loan. A Lombard loan is given in the form of securities and is provided by a financial institution against pledged collateral.

RELATED TERMS
  1. Collateralized Loan Obligation ...

    A security backed by a pool of debt, often low-rated corporate ...
  2. Discount Rate

    The interest rate charged to commercial banks and other depository ...
  3. Federal Reserve Bank

    The central bank of the United States and the most powerful financial ...
  4. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  5. Central Bank

    The entity responsible for overseeing the monetary system for ...
  6. Agency Swap Program

    A form of securitization whereby single-family residential mortgages ...
RELATED FAQS
  1. What is the difference between an Equity REIT and a Mortgage REIT?

    There are several types of real estate investments trusts (REITS) that investors can purchase, including equity REITS and ... Read Full Answer >>
  2. What kinds of derivatives are types of forward commitments?

    A derivative is a type of security in which the price of the security is dependent on underlying assets. A derivative could ... Read Full Answer >>
  3. What are some popular ETFs that track the industrial sector?

    As of April 2015, some of the most popular and best performing exchange-traded funds (ETFs) that track the industrial sector ... Read Full Answer >>
  4. How big is the derivatives market?

    The derivatives market is, in a word, gigantic, often estimated at more that $1.2 quadrillion. Some market analysts estimate ... Read Full Answer >>
  5. What does the notional principal of a derivative contract refer to?

    The notional principal amount of a derivative refers to the nominal, or predetermined, value used to calculate payments made ... Read Full Answer >>
  6. Why is a Free on Board (FOB) designation important for freight transportation?

    A free on board (FOB) designation specifies whether the buyer is responsible for freight charges and determines the obligations ... Read Full Answer >>
Related Articles
  1. Investing Basics

    How Interest Rates Affect The Stock Market

    Whether you're buying lunch, a home or a stock, you're influenced by interest rates.
  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. Personal Finance

    What Are Central Banks?

    They print money, they control inflation, and much, much more. All you need to know about central banks is here.
  5. Active Trading

    The Fed Model And Stock Valuation: What It Does And Does Not Tell Us

    Learn about this popular stock market valuation model and how accurate it has been over the years.
  6. Professionals

    Alternatives Need More Education, Not Enforcement

    While disclosures and investor education need improvement, alternatives provide a valuable way to increase yield and hedge against declines.
  7. Economics

    Explaining the Human Development Index

    The Human Development Index (HDI) is a metric developed by the United Nations to take the emphasis off economic growth and focus on human wellbeing.
  8. Economics

    Gaining Market Influence-- The Case of US Shale

    A convergence of sustained bank financing, falling production costs and rising oil prices might position the US shale industry for a greater market role.
  9. Investing

    Should You Buy Marijuana Stock?

    The legalization of marijuana has created a new investment niche: pot stocks.
  10. Economics

    Infrastructure Investment & Institutional Reforms

    There has been a lot of buzz in the market lately about the prospect for growth and stability in Latin America.

You May Also Like

Hot Definitions
  1. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  2. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  3. 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 ...
  4. Covered Call

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

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  6. 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 ...
Trading Center