4  BIS central bankers’ speeches  Measure (4): Long-term conditional lending The BOJ was the first central bank, under the zero interest rate lower bound, to introduce a long-term lending facility where the amount of lending to financial institutions is conditional on the increased lending by these institutions to the private sector. The aim is to promote lending activities by financial institutions.
It is the objective to ensure that short-term interest rates should be flexible, and should fluctuate to reflect changes in underlying market conditions. The effective rate at which central bank funds are made available to banking institutions is now determined on a daily basis through a tender system for repurchase transactions, entered into between the Reserve Bank and banking institutions.