lender of last resort

  

Definition

Central bank of a country that has the authority and financial resources to act as the ultimate source of credit. In emergencies (such as a run on banks), it extends loans to solvent but illiquid depository institutions whose failure to obtain credit would have a destabilizing effect on the national or regional economy. Central banks have their government's backing to make such loans for retaining the public's confidence in the country's financial system. When central banks themselves get into difficulties, the IMF may act as a lender of last resort.

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