Bank rate

The discount rate (of Italian Disconto to settle for Latin discomputare ) is the interest rate at which to sell a bank exchange to the central bank ( rediscount ) can. So that it can provide liquidity in the short term. As the price it pays for the discount rate ( as a discount on the nominal value).

History

The policy of the Bundesbank was aimed essentially intended to control the lending behavior of banks and the monetary demand of the economy indirectly through changes in bank liquidity and interest rates in the money market. This was derived from § 15 of the Bundesbank Act, who admitted the Bundesbank, the right to determine the discount rate to influence the money supply and credit. The ( re) discount store was found according to § 19 of the Bundesbank Act. The change as credit and cash played a central role in the German economy for a long time. Therefore, the ( re) discount volume reached 1979/1980 its peak and was the decisive source of central bank money supply.

In December 1986, the share of discount loans had fallen to the borrowing to 60%. The discount rate to 1987 played a decisive role in the refinancing of credit institutions by the Bundesbank and as interest rates, because the banks were able to obtain through the sale of Federal Bank bills of exchange liquidity to the discount rate. The function of a reference interest rate came to the discount rate, because he was called as a reference in contracts and laws. Since 1987, the discounting of bills of importance was lost, so that the Lombard rate came to the fore. The exchange refinancing occurred in comparison to the new open market policy instruments of the Bundesbank gradually into the background; their share of total central bank credit in 1994 was only 29.5 % compared to 83.5 % in 1980. their place the repurchase agreements were entered. Fraud whose share of total funding in 1980 only 6%, so they made already in 1994 from 69.7 %.

European Central Bank

Through the European monetary union, the Bundesbank also lost its legal power to determine the interest rates to the European Central Bank. This is responsible for determining the interest rates since January 1999 and has opted for three units, and for a interest rate on the main refinancing operation, for the marginal lending facility and the deposit facility. In addition, she reinforced. Their instruments through open market transactions in the euro area

From January 1999, therefore in § 247 paragraph 1 of the Civil Code (BGB ) had in Germany, the discount rate, as far as this was used in contracts and regulations as a reference rate for interest and other payments, to be replaced by the base rate. The base rate is determined continuously since January 2002 with the entry into force of the law to modernize the law of obligations.