Standing facilities ________.
A)refers to participant borrowing form each other to bring their settlement balances to zero at the end of the banking day
B)refers to the Bank of Canada refusal to lend to or borrow from a participant to bring
Their settlement balances to zero at the end of the banking day
C)refers to the Bank of Canada's building in Ottawa
D)refers to the Bank of Canada being ready to lend to or borrow from a participant to bring
Their settlement balances to zero at the end of the banking day

Question

Quizplus · Accepted Answer

Standing facilities refer to the arrangement where the central bank (in this case, the Bank of Canada) is ready to lend to or borrow from a participant (like a commercial bank) to bring their settlement balances to zero at the end of the banking day. This is done to maintain the smooth functioning of the payments system and to ensure that the banking system has sufficient liquidity. Option A is referring to bilateral borrowing between participants, which is not related to standing facilities. Option B is incorrect because the Bank of Canada does provide standing facilities. Option C is not related to the concept of standing facilities.

Standing Facilities ________