Lombard loan意思

"Lombard loan" is a term that originates from Lombard Street in London, which is the historical center of the city's wholesale money market. A Lombard loan is a type of short-term loan provided by a bank to another bank or financial institution to meet its temporary liquidity needs. These loans are typically very short-term, often overnight, and are used to help banks manage their cash flow and ensure they have the necessary funds to meet their obligations.

Lombard loans are usually collateralized, meaning the borrowing bank pledges eligible securities, such as government bonds or other high-quality assets, as collateral. The interest rate charged for a Lombard loan is known as the Lombard rate or the marginal lending rate. This rate is set by the central bank and serves as the highest rate at which it lends to commercial banks.

The purpose of Lombard loans is to provide a mechanism for banks to borrow money in times of need without affecting the market's liquidity. They are an important tool for central banks in managing the money supply and ensuring the stability of the financial system.