reserve requirement

(redirected from Reserve ratio)
Also found in: Acronyms.

Reserve Ratios

The liquid assets that a central bank or other body mandates that a bank keep at all times. The reserve ratio is expressed as a percentage of the bank's total deposits. The reserve ratio exists to ensure that the bank is able to pay an unusually high number of withdrawals on demand accounts should that event occur. It also helps ensure that the bank does not over-leverage itself. In some countries, increasing or decreasing reserve ratios may be used to help control the money supply. See also: Basel II, Monetary Policy.

reserve requirement

The required percentage of reserves (deposits) that banks and thrifts must hold in cash or in deposits at the Federal Reserve. This requirement is set by the Fed. Any changes in the required percentage are used to influence credit conditions. An increased percentage requirement means fewer funds available for lending and a resultant rise in interest rates. See also monetary policy.

Reserve requirement.

The Federal Reserve requires its member banks to keep a certain percentage of their customer deposits in cash and other liquid assets in reserve at all times.

The required percentage may be revised at the Fed's discretion, but it has not been changed in recent years.

When a bank finds itself with excess reserves, it can lend them to other banks that may need them. These very short-term loans are known as federal funds and the interest rate the lenders charge is called the federal funds rate. That's also the benchmark rate for many corporate and international government loans.

References in periodicals archive ?
The Philippines central bank has said that it has cut its reserve ratio for banks.
The People's Bank of China has announced measures to lower the <B required capital reserve ratio for lenders
5 per cent respectively while the cash reserve ratio and the statutory liquidity ratio have been left untouched at 4 per cent and 21.
YENy DELHy (CyHAN)- India's central bank, the Reserve Bank of India (RBI), decided on Tuesday to keep its key policy rates and the reserve ratios unchanged, RBI Governor Raghuram Rajan said.
of the Bangko Sentral ng Pilipinas had said that the prevailing policy rate settings remained sufficient against a bandwagon of central banks outside the United States that were on the monetary-easing mode, Trinidad said the BSP could still ease credit supply bottlenecks locally by trimming the bank reserve ratio.
Repo rate unchanged at 8% and cash reserve ratio static at 4%
could avoid having to impose specific numerical power-saving targets on its customers this winter, as the utility appears able to secure a more than 3 percent reserve ratio for its electricity supply, sources close to the issue said Saturday.
Mumbai: Borrowers can now look forward to their equated monthly instalments (EMIs) coming down soon as leading bankers Tuesday said they will pass on the benefit of Reserve Bank of India reducing its short-term lending rate and cash reserve ratio to customers.
The capital reserve ratio of the fund fell below zero to negative 1.
5 million, will be subject to a 3 percent reserve ratio.
Although the central bank left the cash reserve ratio unchanged at 4.
The CBE had previously reduced the required reserve ratio from 14 to 12 per cent in March.

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