StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Nobody downloaded yet

Advantages and Disadvantages of the Lender Of Last Resort Function - Assignment Example

Comments (0) Cite this document
Summary
The paper "Advantages and Disadvantages of the Lender Of Last Resort Function" states that the lender of last resort is given protection by the collateral it collects and on the other hand, the bank’s uninsured creditors suffer as a result of the central bank’s activities…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER92.5% of users find it useful
Advantages and Disadvantages of the Lender Of Last Resort Function
Read TextPreview

Extract of sample "Advantages and Disadvantages of the Lender Of Last Resort Function"

Download file to see previous pages The financial safety nets have two important elements and they are the deposit insurance schemes and the central bank (Landau and Lindgren 27).
The central bank provides the extension of credit to the financial institutions that are experiencing financial difficulties and they are incapable of obtaining the required funds elsewhere (CentralBanksGuide.com 1). In other words, the central bank becomes the last option for financial assistance when the other sources of finance are depleted. The major task of the lender of last resort is to maintain the banking stability and the financial system by offering protection to the individual’s deposited funds. The lender of last resort also prevents unnecessary withdraws by the banks that have temporarily limited liquidity (CentralBanksGuide.com 1).
For many years, central banks have been attempting to avert great depressions by taking the role of lender of last resort at times of financial difficulties and crisis. The action of lending as the last resort offers liquidity that has a penalty rate. Through the open market operations, the central bank lowers the interest rates on all the safe assets. The process entails support from the market directly (CentralBanksGuide.com 1). The institutions that go for the lender’s assistance are basically the commercial banks. Commercial banks go for such assistance when the financial times are very difficult; the action by the commercial bank is an indication of financial difficulties. The loans are not granted to the commercial banks alone, there are other eligible financial institutions and private companies that may seek the loans. Although this can be the case, the action is sometimes is considered very risky (CentralBanksGuide.com 1).
The advantages of the lender of last resort can be found in its policies that have three main objectives and the role of the central bank as a lender of last resort. ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(2. Explain the advantages and disadvantages of the Lender Of Last Assignment, n.d.)
2. Explain the advantages and disadvantages of the Lender Of Last Assignment. https://studentshare.org/finance-accounting/1752509-2-explain-the-advantages-and-disadvantages-of-the-lender-of-last-resort-lolr-function-should-a-bank-be-bailed-out-if-it-is-believed-to-have-a-long-term-solvency-problem
(2. Explain the Advantages and Disadvantages of the Lender Of Last Assignment)
2. Explain the Advantages and Disadvantages of the Lender Of Last Assignment. https://studentshare.org/finance-accounting/1752509-2-explain-the-advantages-and-disadvantages-of-the-lender-of-last-resort-lolr-function-should-a-bank-be-bailed-out-if-it-is-believed-to-have-a-long-term-solvency-problem.
“2. Explain the Advantages and Disadvantages of the Lender Of Last Assignment”. https://studentshare.org/finance-accounting/1752509-2-explain-the-advantages-and-disadvantages-of-the-lender-of-last-resort-lolr-function-should-a-bank-be-bailed-out-if-it-is-believed-to-have-a-long-term-solvency-problem.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Advantages and Disadvantages of the Lender Of Last Resort Function

Advantages and disadvantages of outsourcing

...Advantages and Disadvantages of the Lender Of Last Resort Function... Advantages and Disadvantages of the Lender Of Last Resort Function... and Disadvantages of Outsourcing Table of Contents Introduction 3 2.Growing Importance of Outsourcing 4 3.Influence of Outsourcing 6 4.Benefits of Outsourcing 9 5.Risk and Disadvantages of Outsourcing 11 6.Conclusion 13 Reference 14 1. Introduction Outsourcing has become a major business in today’s world. Most of the big companies outsource their work which is not their core operation. To understand outsourcing one has to know what does outsourcing means. Outsourcing can be defined as contracting out a work which is not the core function of the business. Various functions of the business can be outsourced....
9 Pages(2250 words)Essay

Function of Central Banks as Lender of Last Resort (LOLR)

...Advantages and Disadvantages of the Lender Of Last Resort Function... Advantages and Disadvantages of the Lender Of Last Resort Function... of Central Banks as Lender of Last Resort (LOLR) Financial stability policies in the financial sectors are considered to include supervision, regulation and crisis management. All this functions are performed by the central banks which crucially depend on the central bank’s function of lender of last resort (LOLR). LOLR is a crisis management strategy financed by the central bank’s money. One case that relates to central banks’ role as lender of last resort is in the manner that the recent financial crisis was dealt with by many nations. The recent financial crisis started in mid 2007 and ended in 2008. The...
5 Pages(1250 words)Essay

Weathering Steel - Advantages and Disadvantages

...Advantages and Disadvantages of the Lender Of Last Resort Function... Advantages and Disadvantages of the Lender Of Last Resort Function... steel: Introduction: “Weathering steels or weather resistant (WR) steels are colloquial terms used to describe structural steels with improved atmospheric corrosion resistance.” (Corus, 2005). Weathering steel is indeed a group of steel alloys that when exposed to open air, oxidize to develop a rusty, dark brown protective layer that keeps the steel from oxidizing further, thus stabilizing the oxidation and obviating the need for the steel to be coated and protected with paint. It is essentially a low-alloy steel with high strength. Weathering steel is also known as Indaten or Cor-Ten (www.constructalia.com,...
8 Pages(2000 words)Research Paper

Lender of the Last Resort of the European Central Bank

...Advantages and Disadvantages of the Lender Of Last Resort Function... Advantages and Disadvantages of the Lender Of Last Resort Function... Criminal Justice Ethics. The article selected for this paper is on the topic ``should the European Central Bank, to save the euro, become the lender of last resort and bail-out Italy``, this has been selected from economic discipline in the Newyork times best selling articles. The hypothesis of the study in this article is that the European central bank should become the lender of the last result so as to save the euro from weakening .The hypothesis explains that the European central bank should enact a monetary policy and implement the policy by lending to commerc...
1 Pages(250 words)Essay

Advantages and Disadvantages of Globalization

...Advantages and Disadvantages of the Lender Of Last Resort Function... Advantages and Disadvantages of the Lender Of Last Resort Function... is a term used to mean the opening of nationalistic and local perspectives (social, political, cultural and economic) to a broader stance of an interdependent and interconnected nations with free transfer of commodities and capital across national frontiers. Various scholars have tried to examine the meaning of the word globalization, looking it from different angles (Haugen & Mach, 2010). A business definition of globalization is the process of enabling investment and financial markets to operate internationally following improved communications and deregulation. David, et al, (1999) identified the simplest...
6 Pages(1500 words)Literature review

Advantages & Disadvantages of JavaScript

...Advantages and Disadvantages of the Lender Of Last Resort Function... Advantages and Disadvantages of the Lender Of Last Resort Function... & Disadvantages of JavaScript Introduction: JavaScript is a dynamic form of computer language which is used in the purpose of programming. JavaScript has emerged as a leading language that has been used frequently because of its feasibility to target audience. JavaScript had reached a new level of popularity after its adoption from Microsoft as a diverse language for scripting on client side. Due to increment in programming presently, deeper effects of JavaScript has been highlighted regarding its advantages and disadvantages (Quigley, 2004, p. 1). Advantages & Disadvantages of JavaScript: In order to enhanc...
2 Pages(500 words)Essay

Advantages and Disadvantages of Payback

...Advantages and Disadvantages of the Lender Of Last Resort Function... Advantages and Disadvantages of the Lender Of Last Resort Function... and Disadvantages of Payback Payback period Payback period refers to the time period required to recover the initial cost of investment. The payback period helps organizations to determine whether a given an invest proposal or a project is worth undertaking or not. The payback period is calculated as follows: Payback period= Initial investment / annual cash inflows. The above formula is applicable when the annual cash inflow of each financial year remains same. On the other hand if the cash inflows are seen to vary every year, then the cumulative cash inflows are taken into consideration. Payback period is an...
8 Pages(2000 words)Assignment

Advantages & Disadvantages of Monsters

...Advantages and Disadvantages of the Lender Of Last Resort Function... Advantages and Disadvantages of the Lender Of Last Resort Function... mentioning monsters, most kids and adults alike would shake. A number of individuals have just encountered monsters from the films, which has resulted in most people asking whether such creatures exist. Well, the response is NO and YES. NO because certain monsters are as a result of human fancy, and YES because several monsters do exist past just the tag monster alone. All the same, there are those that are actually real. The challenge is determining whether they exist or not, and this requires firm subscription to the different available religious and/or spiritual beliefs. According to Shaw (p23), in Where...
4 Pages(1000 words)Essay

Globalisation: Advantages and Disadvantages

...Advantages and Disadvantages of the Lender Of Last Resort Function... Advantages and Disadvantages of the Lender Of Last Resort Function... Advantages and Disadvantages Introduction Globalization is a term which encompasses a number of difficult series of economic, social, technological, cultural and political changes that have been happening from time to time on the global front. These changes have seen some serious strides that have been made with regards to increasing interdependence as well as mergers and interacting units between people from different locations and companies with diversified interests. The term started to take form in the year 1944 but it was not before the year 1981 that the economists actually started using it. The main...
9 Pages(2250 words)Assignment

Globalization - Advantages and Disadvantages

...Advantages and Disadvantages of the Lender Of Last Resort Function... Advantages and Disadvantages of the Lender Of Last Resort Function... globalization mean the end of the nation state? Table of Contents INTRODUCTION 2 GLOBALIZATION 3 HYPERGLOBALIST 4 SCEPTIC 5 TRANSFORMALIST 7 CONCLUSION 7 REFERENCES 10 Kasper, S. D. (2002) The revival of laissez-faire in American macroeconomic theory: a case study of the pioneers. London, UK: Edward Elgar. 10 Mankiw, N. G. (2008) Principles of Economics. USA: Cengage. 10 INTRODUCTION Globalization is undoubtedly the most powerful force to exist these days in our world. It means different things to different people; some even deny its existence. It has caused wars, peace, excitement, and love not only among t...
9 Pages(2250 words)Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Assignment on topic Advantages and Disadvantages of the Lender Of Last Resort Function for FREE!

Contact Us