Definition
- Lender of last resort
- A lender of last resort stands ready to lend to banks and other financial institutions when they cannot obtain funds from anywhere else.
Example
Can you think of an example of lender of last resort?
A rumour sets off a run on a sound bank. The Bank of England lends it cash against its assets, so it can pay every depositor.
Test yourself
Can you name the five functions of a central bank?