lender of last resort investment & finance definition

A central bank, such as the Federal Reserve in the United States, to whom member banks turn if they are not able to obtain needed funds anywhere else. When the Federal Reserve functions as a lender of last resort, member banks borrow funds from what is called the discount window. The discount window refers to loans that the Federal Reserve makes to its member banks that are used either to pay for large withdrawals or to meet reserve requirements. Banks are discouraged from using the privilege unless they are short of reserves.