What is Money-at-Call?

Money-at-call is any type of short-term, interest-earning ꦯfinancial loan that the borrower has to payback immediately when the lender demands.

Understanding Money-at-Call

Money-at-call, also known as call money or "at call money," is any financial loan that is payable immediately and in full when the lender, usually a bank, demands it. Typically, it is a short-term, interest-paying loan from one to 14 days made by a financial institution to another f🐈inancial institution. Due to the short-term nature of the loan, it does not typically feature regular prꦡincipal and interest payments, which longer-term loans might.

Typical money-at-call loans do not have set repayment schedules, and the interest rate on such loans is called the 澳洲幸运5官方开奖结果体彩网:call-loan rate. Money-at-call gives banks a way to earn interest while retaining liquidity, and, after cash, it is the most liquid asset on their balance sheet. Investors might use money-at-call to cover a 澳洲幸运5官方开奖结果体彩网:margin account.

Participants in money-at-call markets include banks, Primary Dealers (PDs), development finance institutions, insurance companies, and select mutual funds. Banks and PDs can operate both as borrowers and lenders in the market. A bank might require money at call funding when the 澳洲幸运5官方开奖结果体彩网:difference in the maturity of their rate-sensitive assets and liabiliജties creates a gap in available funding.

Money-at-call differs from "short notice money," which is similar but does not require immediate payment when called. Rather, there is a time range of up to 14 days that the lender has to pay back the loan. "Short notice money" is also considered to be a liquid asset that trails cash and money-at-calls in terms of the degree of liquidity. Aside from generating interest, money-at-call's true value is in providing banks the opportunity to profit from surplus funds and maintain proper 澳洲幸运5官方开奖结果体彩网:liquidity levels.

Money-at-call is an important component of the 澳洲幸运5官方开奖结果体彩网:money markets. It has several special features, including as an extremely short period funds management vehicle, as an easily reversible transaction, and as a means to manage a 澳洲幸运5官方开奖结果体彩网:balance sheet. The transaction cost is low, in that it is done bank-to-bank without the use of a broker. It helps to smooth the fluctuations and contributes to the maintenance of proper liquidity and reserves, as required by regulations. It also allows the bank to hold a higher reserve-to-deposit ratio t🌱han would otherwise be possible, allowing for greater efficiency and profitability.

Other Types of Money-at-Call

Many different types of 澳洲幸运5官方开奖结果体彩网:financial instruments can be "called" or declared payable immediately. Short-term lending by banks is callable by the lender. However, many money-at-call instruments are callable by the borrower. The most notable is a 澳洲幸运5官方开奖结果体彩网:callable bond.

Many types of bonds can be called, or be required to be redeemed before maturity, and this provision is written in the bond's 澳洲幸运5官方开奖结果体彩网:indenture and 澳洲幸运5官方开奖结果体彩网:prospectus. These bonds usually have a period when they are not callable, but then switch to callable for the rest of the life of the bond. For example, a 30-year bond may have a 10-year call feature, meaning the bond becomes callable after 10 years. Typically, the bondholder receives a premium above the 澳洲幸运5官方开奖结果体彩网:par value, or 澳洲幸运5官方开奖结果体彩网:face value, of the bond.

Other 澳洲幸运5官方开奖结果体彩网:fixed-income securities, such as 澳洲幸运5官方开奖结果体彩网:certificates of deposit, may also have call features. Even common and 澳洲幸运5官方开奖结果体彩网:preferred stock may have call features if a company wants the option to buy back its shares at a certain priꦏce.

How Money at Call Works

For example♌, brokerage Fi💮rm A wants to buy some shares of Company X. Firm A plans to buy a few thousand shares of Company X on behalf of their client, but the client wants to buy the shares on margin and agrees to pay Firm A for them in 12 days.

Firm A believes that their client will be good for the money, so it covers its cos🌃ts for the purchase of the shares by borrowing money-at-call from Bank XYZ. Because Firm A expects to complete the transaction 🅷quickly, Bank XYZ does not set up a payment schedule but reserves the right to call the loan at any time. If Bank XYZ calls the loan before the 12 days up, Firm A can collect the money by issuing a margin call to its client.