EC223 Chapter Notes - Chapter 17: Overnight Rate, Landing Vehicle Tracked, Financial Institution
Document Summary
Overnight rate the interest rate of overnight loans of reserves from one bank to another, as the primary instrument of monetary policy. Large value transfer system (lvts) an electronic, real time net settlement network, designed to provide immediate finality and settlement to time-critical transactions. Systematic risk the risk to the entire payments system due to the inability of one financial institution to fulfill its payment obligations in a timely fashion. Policy rate the main tool the bank uses to conduct monetary policy. The bank"s objective is to keep the overnight rate within an operating band of 50 basis points (0. 5%). If the overnight rate increases towards the upper limit of the operating band, then the bank will lend at the bank rate to put a ceiling on the overnight rate. If the overnight rate declines towards the lower limit of the operating band, then the.
