ELA

an emergency central bank loan to a bank: against collateral, at a penalty rate

In more detail

An emergency loan from the central bank to a bank, against collateral and at a raised rate.

It was invented back in the nineteenth century on a formula: in a panic, lend freely, against good collateral, at a penalty price. The generosity puts out the panic, the penalty scares off those hoping to profit, and the collateral protects the lender.

Covered in the primer of chapter 8.

In the academy “ELA” is not a definition but an operation: you post it yourself and watch what it does to the balance sheet.

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