rediscount: meaning, definition, pronunciation and examples
C1-C2Formal, Technical
Quick answer
What does “rediscount” mean?
To discount a negotiable financial instrument (like a bill of exchange) that has already been discounted once, typically by a central bank for a commercial bank.
Audio
Pronunciation
Definition
Meaning and Definition
To discount a negotiable financial instrument (like a bill of exchange) that has already been discounted once, typically by a central bank for a commercial bank.
1. The act or process of rediscounting. 2. The rate of interest (the rediscount rate) charged by a central bank for this service. In a broader sense, it can imply a secondary evaluation or reduction in value.
Dialectal Variation
British vs American Usage
Differences
No significant differences in meaning. Spelling follows national conventions (e.g., 'Bank of England' vs. 'Federal Reserve'). The institutional context differs.
Connotations
Connotes central banking policy and liquidity management in both varieties. In the UK, historically associated with the Bank of England's traditional operations. In the US, strongly associated with the Federal Reserve System's discount window.
Frequency
Equally low-frequency in both varieties, confined to specialist financial/economic discourse.
Grammar
How to Use “rediscount” in a Sentence
The central bank rediscounts [BILLS] for [COMMERCIAL BANK][COMMERCIAL BANK] rediscounts [BILLS] with [CENTRAL BANK]Vocabulary
Collocations
Examples
Examples of “rediscount” in a Sentence
verb
British English
- The clearing bank may rediscount eligible trade bills with the Bank of England to manage its short-term cash position.
- The facility allows banks to rediscount government securities.
American English
- Small banks often rediscount agricultural paper at the Federal Reserve's discount window.
- The new regulation made it harder for institutions to rediscount certain asset-backed commercial paper.
adjective
British English
- The bank's rediscount application was approved.
- Changes to the eligible rediscount paper list were announced.
American English
- The Federal Reserve's rediscount rate is a key policy tool.
- They analysed the rediscount operations of the previous quarter.
Usage
Meaning in Context
Business
The commercial bank needed liquidity, so it chose to rediscount its holdings of Treasury bills with the central bank.
Academic
The study analysed the impact of changes in the rediscount rate on money supply growth.
Everyday
Extremely rare. Might be paraphrased as 'to get a loan from the central bank using already-loaned assets.'
Technical
Only securities meeting the central bank's eligibility criteria can be presented for rediscount.
Vocabulary
Synonyms of “rediscount”
Neutral
Weak
Vocabulary
Antonyms of “rediscount”
Watch out
Common Mistakes When Using “rediscount”
- Using it as a general synonym for 'recalculate' or 'reassess'.
- Confusing 'rediscount rate' with the general 'interest rate' or 'discount rate' (the latter can be broader).
- Misspelling as 're-discount' (hyphenated form is less common).
FAQ
Frequently Asked Questions
A rediscount is almost exclusively performed by a central bank (e.g., the Federal Reserve, European Central Bank) for a commercial bank or other eligible financial institution.
Not exactly. The rediscount rate is a specific interest rate set by a central bank for loans it makes to commercial banks via the discount window, using eligible securities as collateral. It is a type of interest rate, but a very specific one in monetary policy.
It is highly unlikely and would sound out of place. It is a technical term from central banking and high finance. In everyday contexts, you would use more general terms like 'get a loan from the central bank' or 'use assets to borrow more money'.
'Discount' in finance broadly means to buy a financial instrument for less than its face value. The first 'discount' happens when a commercial bank buys a bill from a customer. 'Rediscount' is the subsequent action where that commercial bank then sells (discounts) that same bill to the central bank to raise funds.
To discount a negotiable financial instrument (like a bill of exchange) that has already been discounted once, typically by a central bank for a commercial bank.
Rediscount is usually formal, technical in register.
Rediscount: in British English it is pronounced /ˌriːˈdɪskaʊnt/, and in American English it is pronounced /ˌriˈdɪskaʊnt/. Tap the audio buttons above to hear it.
Learning
Memory Aids
Mnemonic
Think RE-DISCOUNT: DISCOUNTing a financial bill a second time (RE-). A bank gets a loan (first discount), then takes that loan to the central bank to get another loan against it (re-discount).
Conceptual Metaphor
MONEY IS A LIQUID (rediscounting provides liquidity), CREDIT IS A CHAIN (rediscounting is a link in the chain).
Practice
Quiz
What is the primary purpose of a rediscount operation?