Lender of last resort

Definition

A lender of last resort is an institution, usually a country's central bank, that offers loans to banks or other eligible institutions that are experiencing financial difficulty or are considered at risk of failure. In the context of international relations, it can also refer to international financial institutions that provide liquidity to countries facing balance of payments crises.

Related terms

Central Bank: A nation's principal monetary authority which regulates the money supply and credit, manages exchange rates, and serves as a bank for the government and commercial banks.

International Monetary Fund (IMF): An international organization that aims to promote global economic growth and financial stability, encourage international trade, and reduce poverty around the world.

Financial Stability: A condition in which the financial system - including its institutions, markets, and infrastructure - is capable of withstanding shocks and the unwinding of financial imbalances while still providing its basic functions to the economy