Lombard rate

Former Interest rate on "Lombard loans" was extended by the Bundesbank. To receive a Lombard loan, the borrowing bank must pledge certain securities.

Banks can borrow money from the German Bundesbank to bridge temporary liquidity gaps by pledging securities as collateral. The Lombard rate in turn determines the interest rate on loans granted by the bank to its credit customers, and thus also influences money market interest rates. In most cases, the Lombard rate is one to two percent higher than the discount rate.

At the beginning of 1999, a comparable interest rate set by the European Central Bank (ECB) replaced the Lombard rate that was previously calculated by the Bundesbank.

Regulations on the eligibility of securities as collateral for Lombard loans are contained in the Bundesbank Act (Bundesbankgesetz, BbankG), section 19 para. 1.

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