What does a lender of last resort provide?

A lender of last resort provides emergency liquidity to financial institutions during times of financial distress or instability. This role is critical in maintaining confidence in the financial system, especially when banks or other financial entities face sudden liquidity shortages that could lead to insolvency. By offering quick access to funds, the lender of last resort helps prevent bank runs and supports the overall stability of the banking system.

In contrast, long-term loans to corporations do not fit this definition since a lender of last resort typically deals with short-term liquidity needs rather than long-term financing. Investment opportunities for banks and advisory support for financial planning are also outside the scope of a lender of last resort's functions, which are specifically designed to stabilize the economy in moments of crisis rather than assist with general business support or investment strategies.