What does SLF mean?
StandingLendingFacility is a monetary policy tool established by most central banks in the world, but it has different names. Such as the discount window of the Federal Reserve, the margin loan mechanism of the European Central Bank, the operational preparation mechanism of the Bank of England and the supplementary loan mechanism of the Bank of Japan.
Drawing lessons from international experience, the central bank set up the Standing Loan Facility (SLF) in early October13, mainly for policy banks and national commercial banks, with a term of 1-3 months, and the interest rate level was comprehensively determined according to the needs of monetary policy regulation and market interest rate guidance. Standing loan is convenient to be issued by mortgage, and qualified collateral includes bond assets with high credit rating and high-quality credit assets.
Standing loan facility is the normal liquidity supply channel of China People's Bank. Its main function is to meet the long-term liquidity needs of financial institutions, improve the effect of monetary regulation, effectively guard against liquidity in the banking system risks and enhance the effectiveness of interest rate regulation in the money market.
Affected by the increasing uncertainty of the international economic and financial situation and the fluctuation of various factors affecting liquidity, the fluctuation of short-term liquidity supply and demand in China's banking system has increased in recent years, especially when multiple factors are superimposed or market expectations change, it may be difficult to solve the short-term fund supply and demand gap in the market through money market financing in time, which not only increases the difficulty of liquidity management of financial institutions, but also is not conducive to the central bank's regulation of total liquidity.