Liquidity facility

Generally, the obligation to provide liquidity to a counterparty, also called a liquidity line. – The credit limit granted to a business entity by the bank, the credit line (credit line committed by a bank in favor of a customer in order to provide it with funding [liquidity], if needed, and at pre-agreed conditions as rates, repayment schedule, collateral, etc.). – In the context of a securitization, an appropriately sized position. It is intended to ensure the timely, smooth forwarding of payments – of the original receivables to the originator (the originating bank), – from the originator to the special purpose entity, and – from the special purpose entity to the investors in the individual tranches. In the event of payment disruptions, the liquidity facility cushions the risk, as the special purpose vehicle, which is generally financially weak, is hardly in a position to do this on its own. Under supervisory law, a number of provisions are linked to the drawing of the liquidity facility; see in more detail Directive 2006/48/EC of the European Parliament and of the Council of June 14, 2006 relating to the taking up and pursuit of the business of credit institutions (recast).

Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent!
University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/