Overdraft Cap

(redirected from Overdraft Caps)

Overdraft Cap

The maximum amount of money that a bank will request from another bank on a business day. This limits the first bank's exposure to the risk that too many transactions will result in overdrafts (which means the second bank may refuse to pay the first bank). Each bank has a different overdraft cap, determined by its risk adjusted capital.
References in periodicals archive ?
Nonetheless, firm overdraft caps would be necessary to prevent banks from borrowing excessively during the synchronization periods.