The labour market is the place where employers in demand of labour and job seekers supplying labour meet.

A Land Central Bank was originally the central bank of each German federal state. In 1992, a number of Land Central Banks were merged leaving only nine. Together with the members of the Bundesbank’s Executive Board, located in Frankfurt, the presidents of the Land Central Banks comprised the Central Bank Council, the main governing body for monetary policy in Germany. As part of a structural reform, in 2002 the politically independent Land Central Banks became non-autonomous administrative units of the Deutsche Bundesbank, known as the regional offices.

A land charge is an encumbrance of a piece of land, i. e. the owner of the real estate property pledges a piece of land to the bank as collateral (security) for personal or third-party obligations under a loan agreement (credit). In the case of deferred payment, the creditor can claim a specific amount of money from the sale of the land. Unlike a mortgage, a land charge is not dependent on a specific claim.

A Landesbank is a central institution of savings banks, generally owned by regional savings banks and giro associations together with the respective federal state. Landesbanks usually assist federal states, local governments and local government associations in their banking business. As a central giro institution, they serve savings banks as a central clearing house for cashless payments.

Legal tender is the means of payment that nobody can refuse to settle a monetary obligation without experiencing legal disadvantages. In the euro area, euro banknotes and coins are legal tender; only Eurosystem central banks are allowed to introduce euro banknotes and coins into circulation. In Germany, banknotes denominated in euro are the sole unrestricted legal tender. Euro coins are restricted legal tender as no one is obliged to accept more than 50 coins or coins to the value of more than €200. German commemorative euro coins are legal tender throughout the euro cash area. However euro collector coins are only valid in the issuing country. Euro collector coins are distinguished by the fact that their nominal value is not equivalent to a regular coin (for example 1/4 euro or 5 euro).

If a central bank provides central bank money to a bank to protect it from otherwise unavoidable liquidity bottlenecks, the central bank is said to be acting as the lender of last resort. In doing so, its aim is to prevent a temporary liquidity bottleneck from bringing to the brink of collapse an otherwise solvent bank which is therefore able to continue as a going concern, and thus to minimise the knock-on effect on other banks. Emergency liquidity assistance (ELA) is an instrument used to bridge such liquidity bottlenecks.

In Single Supervisory Mechanism (SSM) jargon, a less significant institution (LSI) is any bank that is supervised by national competent authorities (NCAs).

Leverage effect refers to the disproportionately strong influence of borrowed funds on the return on equity. If lending rates are lower than capital market interest rates, for example, then borrowed funds, acquired and reinvested in the capital market, can increase the return on the investment (positive leverage effect). However, if the yield is lower than the interest to be paid, the leverage effect can lead to considerable losses and capital depletion.

In general, the leverage ratio is defined as the ratio of debt to equity and thus provides information about how an enterprise's financing is structured. In banking supervision, the leverage ratio is a measure comprising a bank's regulatory tier 1 capital in the numerator and its total exposure in the denominator. According to the Capital Requirements Regulation (CRR), the leverage ratio must be at least 3%; this means that at least €3 of regulatory tier 1 capital must be held against an exposure of €100.

The acquisition of established enterprises in whole or in part by private equity companies using a large proportion of borrowed funds. Interest and redemption payments are generally financed from the future earnings of the acquired enterprise or by selling parts of the business.

In Eurosystem jargon, liquidity is synonymous with central bank money. This is because cash, a component of central bank money, is legal tender and has the highest degree of liquidity. The term also applies to persons and enterprises. These are deemed liquid when they are able to fulfil their payment obligations at any time. Correspondingly, fixed or financial assets can be categorised according to their degree of liquidity or how readily they can be converted into cash. Logically, then, cash has the highest degree of liquidity. While securities traded in the markets have a lower degree of liquidity than cash, they are much more liquid than real estate owing to the much lengthier process of selling property.

A supervisory minimum ratio of short-term liquidity that banks have to hold. In order to achieve the required liquidity coverage ratio (LCR) of at least 100%, a bank’s available liquid assets have to surpass its expected cumulative net cash outflows over a period of at least 30 days. This is designed to ensure that banks are able to withstand a severe stress scenario, such as the coincidence of a partial run on customer deposits and the drying-up of unsecured funding. The LCR will enter into force in 2018.

The Liquidity Regulation (Liquiditätsverordnung) gives concrete shape to the requirements of section 11 of the German Banking Act (Kreditwesengesetz), under which institutions must ensure that they are solvent at all times. From a supervisory perspective, an institution has sufficient liquidity if expected payment outflows do not exceed available funds within the calendar month following the reporting date. The Regulation applies to all credit institutions as well as to certain financial services institutions up until the end of 2017. As from January 2018, the requirements will cease to apply for those institutions which, from that time on, are required to comply fully with the liquidity coverage ratio (LCR). The provisions of the Liquidity Regulation will continue to apply to institutions to which the LCR is not applicable.

The Liquidity Regulation (LiqV) imposes payment obligations on credit institutions and financial service institutions to ensure that they are solvent at all times. It is based on section 11 of the German Banking Act (Kreditwesengesetz or KWG).

This term generally refers to the risk that enterprises or banks will no longer be able to meet their payment obligations in full or on time, or only at a prohibitive cost. In a simplified sense, an entity is liquid if its cash balance plus inflows are greater than its simultaneous outflows. Liquidity risk is one of what are referred to as “banking risks”.

A situation in which an increase in the money supply (= expansive monetary policy) no longer has the effect of lowering the short-term interest rate (for example, with an interest rate close to zero).

“Living will” is the colloquial term given to plans which banks are required to draw up in response to the banking crisis. In the event of a situation that threatens to bring a bank to the verge of collapse, the preventive, bank-specific crisis planning measures and early intervention options that these living wills should contain are intended to ensure that the institution can be resolved rather than needing to be bailed out by the state (as was the case in the past).

A loan is where a lender provides a borrower with a sum of money for a limited period of time. The borrower is obliged to pay interest to the lender. There are numerous types of loans, which are characterized by different maturities, type and scope of collateral or use (e.g. real estate credit, overdraft facility, instalment loan).

Loan-to-value (LTV) ratio is a general term used in bank credit business to describe the ratio of the loans granted to a borrower to the value of the collateral deposited by that borrower. It is particularly used in mortgage lending to show the loan amount as a percentage of the mortgage lending value of the property. While the mortgage lending value of the property, which takes its bearings from the market value, represents the loan collateral's theoretical maximum eligibility to serve as collateral, the loan-to-value ratio shows the overall credit risk compared to the mortgaged collateral. The loan-to-value ratio is expressed as a percentage of the mortgage lending value of the property. The lower the percentage, the lower the risk of loss for the lender.

Before the introduction of the European System of Central Banks (ESCB), the lombard loan was used as a monetary policy instrument by the Deutsche Bundesbank. Together with discount business, it was a key element of the Bundesbank’s refinancing policy. As part of its lombard policy, the Bundesbank granted interest-bearing loans with a maturity of up to three months to credit institutions against pledged securities. The interest rate on the lombard loan, known as the lombard rate, was normally above the discount rate and provided the ceiling for the overnight rate. The Bundesbank stopped using lombard loans after the introduction of the ESCB. Its monetary policy function is now fulfilled by the marginal lending facility.

Alongside discount business, this was the second underlying business activity of a central bank, which provided short-term credit against an easily transferable pledge at a rate of interest (Lombard rate). Previously, not only negotiable securities but also gold, silver and other goods could be used as Lombard collateral.

The London Interbank Offered Rate (Libor) is the average interest rate for short-term interbank loans that is calculated on any business day by the British Bankers' Association. To calculate the Libor rate, a panel of banks report the interest rate at which they can borrow funds from other banks. Rates are set for ten currencies and fifteen borrowing periods ranging from overnight to one year. Unlike the Euro Overnight Index Average (EONIA), the Libor is based not on actual transactions but on market observations. It serves as the benchmark reference rate for many variable-rate loans around the world. In mid-2021, the European Commission, together with the ECB Banking Supervision, the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA), issued a statement calling on market participants to reduce their exposures referencing LIBOR interest rates and to stop using LIBOR in new contracts.

Using the Longer-term refinancing operations (LTRO), the Eurosystem provides banks with central bank money for a longer period of time than is the case under the main refinancing operations. In the first years following the launch of Economic and Monetary Union, the Eurosystem conducted three-month LTROs once a month. As the financial and sovereign debt crisis developed, these traditional LTROs were joined by Eurosystem operations with terms of one year and longer. Two high-volume three-year LTROs which the Eurosystem carried out at the end of 2011 and the start of 2012 attracted a great deal of attention. Colloquially, ECB President Mario Draghi dubbed these high-volume operations “Big Berthas”.

Adjustment of the book value of an item on the asset side of the balance sheet to reflect the actual value situation.

"Low interest rate environment” describes a state of the economy in which interest rates are very low – or even negative, in some cases – across all maturities. Exceptional policy rate cuts by central banks were a major contributor to the low interest rate environment that followed the financial crisis. These cuts were intended to bolster economic growth and inflation. The Eurosystem even lowered the interest rate on the deposit facility to below zero in order to achieve its primary goal of maintaining price stability. However, a downward trend in longer-term real interest rates is also currently in evidence in industrial countries, where annual growth rates have already been declining for years, not least because an ever-greater number of people going into retirement.

The Eurosystem’s highly accommodative monetary policy has supported aggregate demand and inflation in the euro area over the past few years. It may, however, have undesirable side effects as well, such as potential risks to financial stability. For instance, low interest rates may create incentives for yield-seeking investors to take excessive risks or result in overvaluations in the real estate market. A prolonged period of low interest rates also weighs on banks’ and insurance companies’ earnings.

From the public’s perspective, low interest rates are a double-edged sword. On the one hand, individuals only receive low interest payments on their bank balances – indeed, in some cases, negative interest rates force households to pay interest on their bank deposits. On the other hand, as employees, taxpayers and borrowers, individuals also benefit from the situation: favourable financial conditions for enterprises result in higher investment and increased demand, protect jobs, bolster growth in wages and thus in statutory pension payments, relieve the government budget and make it more affordable to take out loans for purposes such as building a house.

Negative nominal interest rates are a new phenomenon. By contrast, periods of negative real interest rates (i.e. the nominal interest rate less the inflation rate) on short-term bank deposits have occurred frequently in the past – for example, in the 1970s, at the start of the 1990s and in the 2000s.