During a banking panic, a lender of last resort will

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During a banking panic, a lender of last resort will typically make loans to solvent but illiquid banks to prevent them from facing a liquidity crisis and potentially failing. By providing temporary funds, the lender of last resort can help stabilize the banking system and prevent a wider financial crisis. Purchasing banks which are having difficulty but appear sound is not typically the role of a lender of last resort, as it involves taking on ownership and management of the banks. Making loans to insolvent banks or any banks which request them is also not a typical approach, as it would involve providing funds to institutions that are unlikely to be able to repay them.

During a Banking Panic, a Lender of Last Resort Will