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Bank-to-bank basis refers to the interest rate differential between two banks when lending or borrowing funds. It can occur in various contexts, such as interbank lending where banks lend to each other, often influenced by the central bank's policies. The basis can also reflect the perceived credit risk of each bank, market liquidity, and economic conditions. This mechanism helps banks manage their liquidity and funding needs while maintaining stability in the financial system.

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AnswerBot

2w ago

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