Lombard policy
Under Lombard policy all measures are a central bank together, the regulation of the money supply in an economy by pledging of securities or other collateral capable serve assets and rights. These must be owned by the pledging bank and therefore do not come from its customer business.
General
The central banks usually have a set of so-called central bank measures at their disposal which they can use against the commercial banks according to economic requirements. These measures serve to control the money supply and are therefore a means of monetary policy of a central bank. This also includes Lombard policy, which is part of central bank measures.
Lombard policy instruments
The central banks can impose both quantitative limits (setting Lombard facilities or quotas) and qualitative restrictions (limitation to certain types of securities through the Lombard list). A direct means of control is the price at which they grant Lombard loans , the Lombard rate .
- Change in the lombard rate : A high lombard rate makes it more expensive for banks to obtain liquidity . This means that you can grant fewer loans and limit the creation of money and vice versa.
- Introduction of Lombard quotas : The maximum number of securities that can be pledged is limited according to bank-specific criteria. A lowering of the quotas reduces the creation of money, an increase increases it.
- Change in the quality requirements for securities eligible for bombardment: Stricter requirements reduce the creation of money, less stringent increases it.
Germany
Due to the importance of the change as a means of credit and payment, the discount policy played the decisive role in the refinancing of credit institutions by the Deutsche Bundesbank for a long time until 1986 . The banks were able to obtain liquidity at the discount rate by selling bills of exchange eligible for the Bundesbank . In December 1986 the share of discount credit in borrowing had fallen to 60%. Since January 1987 the discounting of bills of exchange had lost its importance, so that the Lombard policy came to the fore. The share of bill refinancing in total central bank loans was only 29.5% in 1994, compared to 83.5% in 1980. They were replaced by repo transactions . While their share of total refinancing was only 6% in 1980, in 1994 they made up 69.7%.
In Germany, the Lombard rate was set by the Bundesbank until December 1998. The legal basis was Section 19 (2) BBankG a. F., the Lombard transactions were in Section 19 Paragraph 1 No. 3 BBankG a. F. established. Since January 1999, the Bundesbank has only acted as the executive body of the ECB in monetary policy because the task of Lombard policy has been transferred to the ECB.
European Central Bank
With the transfer of responsibility for monetary policy to the ECB , the marginal lending facility replaced the former Lombard loan in January 1999. According to Art. 18.1 of the ECB Statute, the ECB is therefore authorized, within the framework of its Lombard policy, to conclude credit transactions with the affiliated credit institutions against “sufficient collateral”, so-called central bank- eligible collateral . Since January 2007, a uniform framework (“uniform list of collateral”) has been in place for eligible collateral, which includes marketable and non-marketable collateral. In the case of collateral eligible for a central bank, lending limits are applied depending on the liquidity categories, remaining terms and types of interest, as well as fluctuation margins, as is the case with Lombard loans.
Individual evidence
- ↑ Werner Ehrlicher / Diethard B. Simmert, Changes in the monetary policy instruments of the Deutsche Bundesbank , 1988, p. 134.