It stands for lender of last resort; the institution (usually a central bank or monetary agency) in a financial system that is sought by a financial institution (a regulated entity) for provision of liquidity in the event, and under the situations, where the latter is unable to secure sufficient liquidity in the interbank market. Prior to resorting to a last resort lender, an institution needs to consider all other liquidity facilities or sources have been tapped into/ exhausted.

A central bank is the highest authority within an economy that is mandated to averting banking panics and crises. This aims to prevent a panic-induced collapse of the banking/ financial sector. For banks that experience shortages of liquidity, a central bank extends emergency loans in order to reassure clients and assuage wide-spread fears of a bank’s inability to make their funds available at the time of need. At times, only a commitment made by a last resort lender to bail out banks in trouble would suffice to thwart such a possibility of running into a sector-wide bank run and individual or systemic collapses.

It is also known for short as LLR.