Rediscount

Rediscount (or rediscounting ) is in the banking sector of the resale of a change, the credit institution shall in turn previously purchased as part of the discount credit of customers to a central bank.

General

The discount credit belongs in Germany to the banking business in accordance with § 1 Section 1 No. 3 of the Banking Act. The banks thus it is legally allowed to change ( and checks) to buy from their customers. Through the purchase of the bill, the bank wrote to her customers to switch amount minus the discount rate as well and gave the customer liquidity. Since the bank this liquidity was lost, they procured these liquidity through resale of the exchange to the Central Bank under the rediscounting again.

Germany

Due to the original meaning of the bill as credit and cash in the German economy played a long time the rediscounting under the discount policy, the crucial role in the refinancing of credit institutions. Had begun the Reichsbank, which the banks opened after its establishment in March 1875, a further source of funding, so that no longer had to rely on deposits as the sole source of the Institute. Through the rediscounting of bills of exchange, the Reichsbank had asked a source of procurement of central bank money available to the institutions with which they could create liquidity by monetizing circulation bills of exchange.

The Rediskontpolitik was continued by the successor institution German Bundesbank. Here, the banks were able to obtain at the discount rate by selling nationwide bankable Jump liquidity. 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%. Since January 1987, the rediscounting of bills of importance was lost, so that the Lombard policy came to the fore. The proportion of Wechselrediskontierung to the 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 %.

The changes and thus the discount and rediscount has in daily banking business today no more importance since it "machine - or computer- capable " and thus is not relatively labor-and cost -consuming due to its instrument property and also its function as credit and cash in the German economy has largely lost.

Instruments of the discount policy

Central banks could both quantitative limitations (definition of rediscount quotas ) as well as qualitative restrictions require (limitation on commercial bills with a residual maturity of up to 3 months, at least 3 as a solvent known exchange participants, payable at a place with Central - office ). A direct control agent is the price at which they grant loans discount, the discount rate. This was until December 1998, the base rate of the Bundesbank.

Legal bases

In Germany, the discount rate was set at rediscounting by the Bundesbank to December 1998. The legal basis was § 15 of the Bundesbank Act, old version, the discount stores were set 3 Bundesbank Act old version in § 19 para 1 no. The Bundesbank acts since January 1999 in monetary policy only as an exemplary body of the ECB, because the task of monetary policy as a whole have been transferred to the ECB.

European Central Bank

With the transfer of responsibility for monetary policy to the ECB, the main refinancing operation has replaced the former rediscounting in January 1999. The European Central Bank rediscounted no changes, but also gives the commercial banks liquidity otherwise.

Thus, the discount store has lost its appeal for financial institutions due to the absence of Rediskontierungsmöglichkeit of commercial paper at the German Bundesbank and the ECB. Commercial bills are ineligible only as a deposit at the Bundesbank. For these reasons there since January 1999 either at national level or EU-wide Rediskontierungsmöglichkeit of bills. This also discount credit of commercial banks has come to a standstill.