A credit facility that a central bank makes available to counterparties (banks and other financial institutions) at their own initiative. Examples of such credit facilities include overnight standing facilities (marginal lending facility and deposit facility). Standing facilities or instruments are usually available to banks without restriction under normal circumstances.
By design, such facilities/ instruments aim at providing and absorbing overnight liquidity available at regulated entities. As such, standing facilities are used by central banks as part of the overall monetary policy objectives to effectively regulate the money supply and systemic liquidity.
The interest rates on these facilities/ instruments create a band in which the money market interest rates can fluctuate.
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