reserve requirement

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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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
The proposal would require the FDIC to automatically apply small bank credits to quarterly assessments when the reserve ratio is at least 1.35 percent, rather than 1.38 percent, as required under current regulation.
The head of the Philippines central bank has said that the bank could make more reserve ratio cuts.
Diokno, who took office in March, is following through on a pledge by his predecessor, the late Nestor Espenilla, to bring down Southeast Asia's highest reserve ratio to single digits by the middle of 2023.
"To me, that is also clear because we have one of the highest reserve ratio in this part of the world.
The department also reported the FHA had a reserve ratio of around 3% in 2008, but in 2013 it needed a $1.7 billion taxpayer bailout to cover losses.
The People's Bank of China has announced measures to lower the <B required capital reserve ratio for lenders
The repurchase rate and reserve repurchase rate have also been maintained at 7.5 percent and 6.5 percent respectively while the cash reserve ratio and the statutory liquidity ratio have been left untouched at 4 percent and 21.5 percent.
Accordingly, the repurchase rate and reserve repurchase rate have been maintained at 7.5 per cent and 6.5 per cent respectively while the cash reserve ratio and the statutory liquidity ratio have been left untouched at 4 per cent and 21.5 per cent.
"Amid rapid normalization of M3 (domestic liquidity), prevailing disinflation despite recent oil price corrections and trimmer SDA (special deposit accounts), we believe theres opportunity for a one-percentage cut in the bank reserve ratio," Trinidad said.
In addition, the central bank will cut the reserve ratio by an extra 50 basis points for urban and rural commercial banks that lend to small and mid-sized businesses.
The reverse repo rate was kept unchanged at seven percent and Cash Reserve Ratio (CRR) was maintained at four percent.

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