A lending facility that is extended overnight, applying an overnight rate– that is, the interest rate at which a depository institution (a bank) lends or borrows money from another depository institution in the overnight market (overnight interbank market). In certain countries, the overnight rate (overnight facility rate) may be used as the rate targeted by a central bank to fine-tune a country’s monetary policy.
An overnight lending facility is a means by which financial assistance (overnight liquidity) is provided to banks and other financial institutions, within a system. Typically, this aims to enable certain financial institutions to secure very short liquidity that might be needed on a daily basis (e.g., reserve requirements imposed by central banks).
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