A central banking function in which the central bank stands willing to extend credit to any temporarily illiquid but otherwise solvent banking institution to prevent its illiquid position from leading to a general loss of confidence in that institution is known as:

Question

Quizplus · Accepted Answer

The function described in the question is that of a lender of last resort, which is the role of a central bank to provide liquidity support to financial institutions in times of crisis to prevent a systemic banking crisis. The other choices do not accurately describe this function. A banker's bank is a bank that primarily provides services to other banks, a fiscal agent is a governmental agency responsible for managing financial transactions, and a monetary authority is an organization that manages a country's monetary policy.

A Central Banking Function in Which the Central Bank Stands