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.

BREAKING DOWN '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. Committed Facility

    A credit facility whereby terms and conditions are clearly defined ...
  2. Net Lending

    The amount of extra funds that a sector has available to provide ...
  3. Retail Credit Facility

    A financing method which provides loan services to retail consumers ...
  4. Consumer And Business Lending Initiative

    A plan initiated to aid in the government's goal of correcting ...
  5. Bank Lending Survey

    A questionnaire circulated by a country's central banking authority ...
  6. Federal Reserve Credit

    Refers to the process of the Federal Reserve lending funds on ...
Related Articles
  1. Investing

    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.
  2. Investing

    Lending Club to Announce Earnings Oct. 27 (LC, GS)

    Lending Club enters its second year as a publicly trading company, adjusting its risk management to stem losses.
  3. Financial Advisor

    Why Banks Don't Need Your Money to Make Loans

    Contrary to the story told in most economics textbooks, banks don't need your money to make loans, but they do want it to make those loans more profitable.
  4. Investing

    Cash Flow Lending Vs. Asset-Based Lending

    When companies need financing, they rely on two primary forms of lending: cash flow-based and asset-based lending. We look at the pros and cons of each.
  5. Insurance

    Peer-To-Peer Lending Breaks Down Financial Borders

    Banks are no longer the only option for a loan - the P2P lending system operates without them.
  6. Investing

    The Origins of the Chinese Stock Market Collapse

    Learn about some of the reasons for the volatility in the Chinese stock market, including expansion of margin lending and governmental support.
  7. Small Business

    Lending Clubs: Better Than Banks?

    If you need to borrow money and your credit is making it tough, this new option may be just what you're looking for.
  8. Investing

    Goldman Makes New Foray Into Web Lending (GS, LC)

    The investment bank is prescreening loan candidates for the platform, which has no upfront and late fees.
  9. Retirement

    Yet Another P2P Lending Risk for Investors?

    Are P2P investors legally liable for redlining if they exclude borrowers in certain states when deciding which notes to purchase? Probably not. Here’s why.
RELATED FAQS
  1. Who do hedge funds lend money to?

    Discover the various entities that hedge funds are lending to, and the reasons why these hedge funds have been providing ... Read Answer >>
  2. What impact does the Federal Reserve have on a bank's profitability?

    Learn how the Federal Reserve impacts a bank's profitability with its influence on the discount rate, federal funds rate ... Read Answer >>
  3. What is the difference between a green field and a brown field investment?

    Distinguishing between two types of foreign direct investments: Green-field and Brown-field. The main distinction: whether ... Read Answer >>
  4. What economic indicators are important to consider when investing in the banking ...

    Find out which economic indicators are most useful for investors in the banking sector, especially those influenced by central ... Read Answer >>
  5. What are the implications of a high Federal Funds Rate?

    Learn the implications of a high federal funds rate, which include constriction of the money supply, a stronger dollar and ... Read Answer >>
Trading Center