A Lombard transaction is a lending transaction that guarantees the short-term granting of credit against the pledging of goods or securities. A maximum of 2/3 of the pledged items are lent against goods and 3/4 against securities. This approach is intended to avoid price losses as far as possible. The interest rate (Lombard rate) set by the Deutsche Bundesbank in earlier years was 1-2% higher than the discount rate for Lombard transactions. Since 1999, the European Central Bank, as the central bank, has conducted the monetary policy and thus also the Lombard policy of the members of the European Economic and Monetary Union. However, the ECB relies on deposit and refinancing facility interest rates instead of Lombard and discount policies. At these interest rates, banks can obtain over-night loans from the central banks or invest over-night deposits. Lombard business is also referred to as Lombard credit.
