Interbank Market

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Definition of 'Interbank Market'

The interbank market is a global network of banks that trade money and other financial instruments with each other. It is the largest and most liquid market in the world, with an estimated daily turnover of over $5 trillion.

The interbank market is used by banks to manage their liquidity and to hedge their risks. Banks use the interbank market to borrow and lend money to each other, to trade currencies, and to trade interest rate derivatives.

The interbank market is a critical part of the financial system. It provides banks with the liquidity they need to operate, and it helps to facilitate the flow of money around the world.

The interbank market is not without its risks. The market is susceptible to volatility, and there have been a number of major crises in the interbank market in recent years. The most recent crisis was the global financial crisis of 2008, which was triggered by a collapse in the interbank market.

The interbank market is regulated by a number of different authorities, including the Federal Reserve in the United States, the Bank of England in the United Kingdom, and the European Central Bank in the European Union. These authorities aim to ensure the stability of the interbank market and to protect banks from the risks of the market.

The interbank market is a complex and important part of the financial system. It plays a vital role in the smooth functioning of the global economy.

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