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imported>Doug Williamson |
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| Borrowers and depositors generally have differing preferences about the maturity of their obligations and investments.
| | The buying or selling of financial securities in the open market by the central bank to influence the amount of money in circulation. |
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| Borrowers normally prefer to borrow longer-term, for example to fund long-term investment in productive assets.
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| Investors generally prefer shorter-term, more liquid assets.
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| | == See also == |
| | * [[Monetary policy]] |
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| Maturity transformation is the essential economic function of banks and other intermediaries, which enables both borrowers and investors to meet their differing needs for maturities.
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| For this to work, there needs to be a very high degree of market confidence in the bank, especially on the part of its depositors.
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| == See also ==
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| * [[Bank]]
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| * [[Interest rate transformation]]
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| * [[Leverage]]
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| * [[Liquidity preference]]
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| * [[Maturity]]
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| * [[Maturity mismatch]]
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| * [[Prudential Regulation Authority]]
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| * [[Riding the yield curve]]
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| * [[Run]]
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| * [[Shadow banking]]
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Revision as of 14:20, 23 October 2012
The buying or selling of financial securities in the open market by the central bank to influence the amount of money in circulation.
See also
