Interbank Lending

Business, Legal & Accounting Glossary

Definition: Interbank Lending




Full Definition of Interbank Lending


Interbank lending is a direct result of the Federal Reserve financial requirement for its member banks. Each bank is required to keep a certain amount of cash in their reserve, so they lend/trade their excess reserve on an overnight basis to provide needed funds to another bank. The Fed sets the rate on these transactions.

In Oct 2008, the instability of financial institutions made lending banks nervous to issue any funds overnight for fear that the borrowing banks could fail. This added to the financial turmoil that was already reeling the economy and the markets.


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Definition Sources


Definitions for Interbank Lending are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 6th August, 2021 | 0 Views.