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Reserve Ratios

   Also found in: Wikipedia 0.01 sec.
Reserve ratios
Specified percentages of deposits, established by the Federal Reserve Board, that banks must keep in a noninterest-bearing account at one of the twelve Federal Reserve Banks.

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.


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Despite recent declines in reserve ratios, the financial position of both FDIC funds remains solid.
Regulation D (RegD) reserve on Eurodollar (E$) deposits in New York acts as a tariff on "imported" dollars, even though the reserve ratios are the same on both the E$ deposits and domestic deposits of the same maturity.
Canada, France, Germany, Italy, Japan, United Kingdom, and United States) have reduced their reserve ratios as well as simplifying reserve ratio trenches over the past decade in an attempt to lighten the burden they placed on banks.
 
 
 
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