LOMBARD RATE Meaning and
Definition
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The Lombard rate refers to the benchmark interest rate that is set by central banks to determine the interest charged on loans collateralized by eligible securities. In other words, it is the rate at which a central bank is willing to lend against certain assets, typically high-quality securities such as government bonds or other approved securities.
The purpose of the Lombard rate is to provide a source of liquidity for financial institutions and prevent disruptions in the financial markets. Banks can borrow money from the central bank using eligible collateral as a security, commonly referred to as Lombard loans. The interest rate charged on these loans is typically higher than the central bank's main refinancing rate.
The Lombard rate plays a crucial role in managing the money supply and influencing interest rates in the economy. By adjusting the Lombard rate, central banks can control the availability of credit, encourage or discourage borrowing, and thereby influence economic activity.
The term "Lombard" originates from Lombardy, a region in Northern Italy known for its medieval moneylenders who accepted collateralized assets, including movable property and merchandise. The term has since become associated with the practice of lending against collateral, particularly high-quality securities.
Common Misspellings for LOMBARD RATE
- kombard rate
- pombard rate
- oombard rate
- limbard rate
- lkmbard rate
- llmbard rate
- lpmbard rate
- l0mbard rate
- l9mbard rate
- lonbard rate
- lokbard rate
- lojbard rate
- lomvard rate
- lomnard rate
- lomhard rate
- lomgard rate
- lombzrd rate
- lombsrd rate
- lombwrd rate
- lombqrd rate
Etymology of LOMBARD RATE
The term "Lombard" originates from the Lombardy region in Northern Italy during the Middle Ages. Lombardy was a wealthy and influential area, particularly known for its banking and monetary activities. Lombard bankers were famous for their role in providing loans against collateral, usually accepting valuable assets such as jewelry, gold, or other securities.
Over time, the practice of providing loans against collateral came to be known as "lombard lending" or "lombard borrowing". The Lombard rate, specifically, refers to the interest rate charged on these loans.
The term "Lombard" has also been associated with similar practices in other regions. For instance, in Switzerland, the central bank rate is called the "Lombard rate". Despite variations in the implementation of lombard lending or rates in different countries, the term has its roots in the historical Lombardy region of Italy.
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