directive

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directive

  1. EUROPEAN UNION Directives which EU member states are required to incorporate into their own legislation. For example, The Fourth Directive introduced standardized formats for presenting company accounts; the Seventh Directive tightened up the requirements relating to group accounts; the Eighth Directive dealt with the qualifications of auditors.
  2. a request' by the monetary authorities that the COMMERCIAL BANKS and other financial institutions should limit the amount of LOANS and OVERDRAFTS they make available, in order to control spending in the economy. See MONETARY POLICY for further details.

directive (bank)

an instrument of MONETARY POLICY involving the control of bank lending as a means of regulating the MONEY SUPPLY. If, for example, the monetary authorities wish to lower the money supply, they can ‘direct’ the banks to reduce the total amount of loan finance made available to personal and corporate borrowers. A reduction in bank lending can be expected to lead to a multiple contraction of bank deposits and, hence, a fall in the money supply. See BANK DEPOSIT CREATION.
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