Primary Reserves


DEFINITION of 'Primary Reserves'

The minimum amount of cash required to operate a bank. Primary reserves also include the legal reserves that are housed in a Federal Reserve or other correspondent bank. Checks that have not been collected are included in this amount as well.

BREAKING DOWN 'Primary Reserves'

Primary reserves are kept in order to cover unexpected major withdrawals or runs of withdrawals. They serve as a defense against a substantial reduction in liquidity. These reserves must be kept more liquid than secondary reserves, which may be invested in marketable securities such as Treasury offerings.

  1. Secondary Reserves

    Assets that are invested in safe, marketable, short-term securities ...
  2. Lagged Reserves

    A method of bank reserve calculation whereby the financial institution ...
  3. Proved Reserves

    A classification used in mining sectors that refers to the amount ...
  4. Free Reserves

    A measurement of a bank's reserves that is equal to the difference ...
  5. Correspondent

    The name given to a bank, broker, dealer, or financial institution ...
  6. Excess Reserves

    Capital reserves held by a bank or financial institution in excess ...
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  1. How is the Federal Reserve audited?

    Contrary to conventional wisdom, the Federal Reserve is extensively audited. Politicians on the left and right of a populist ... Read Full Answer >>
  2. Who decides when to print money in the US?

    The U.S. Treasury decides to print money in the United States as it owns and operates printing presses. However, the Federal ... Read Full Answer >>
  3. Why do some people claim the Federal Reserve is unconstitutional?

    The U.S. Constitution does not mention the need for a central bank, nor does it explicitly grant the government the power ... Read Full Answer >>
  4. How can the federal reserve increase aggregate demand?

    The Federal Reserve can increase aggregate demand in indirect ways by lowering interest rates. Aggregate demand is a measure ... Read Full Answer >>
  5. How does the stock market react to changes in the Federal Funds Rate?

    The stock market reacts to changes in the federal funds rate in various ways depending on where it is in the business cycle. ... Read Full Answer >>
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