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.

RELATED TERMS
  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 ...
Related Articles
  1. Markets

    Burn Rate Key Factor In Company's Sustainability

    Be careful around companies with high cash burn rates. These investments can turn to ashes.
  2. Fundamental Analysis

    Spotting Profitability With ROCE

    This straightforward ratio measures whether a company is efficient, money-making or neither.
  3. Term

    What Is Contractionary Policy?

    A contractionary policy is a macroeconomic tool used to slow down an economy.
  4. Economics

    8 Harmful Side Effects of Continued European Quantitative Easing (Q.E.)

    Read about eight harmful side effects of European Central Bank's decision to boost its quantitative easing (QE) program and push interest rates even lower.
  5. Investing News

    What to Expect at April's FOMC Meeting

    The Fed won't raise rates Wednesday, but it's worth paying close attention to Yellen's comments about the future trajectory of rates.
  6. Economics

    Does Quantitative Easing (Q.E.) Add to Inequality?

    Learn about quantitative easing (QE) and whether or not this new central banking policy tool plays a role in helping or hindering income inequality.
  7. Economics

    How Do Central Banks Inject Money Into The Economy?

    Central banks inject money into the banking system, and remove money from it, through monetary policy actions.
  8. Economics

    Explaining the Federal Reserve System

    The Federal Reserve System is the central bank of the United States. It regulates monetary policy and supervises the nation’s banking system.
  9. Investing News

    Citigroup Passes Fed's 'Living Will' Test (C, WFC)

    How much of a premium does Citigroup's "Living Will" success command? And has the bank become the safest among its "too big to fail" peers?
  10. Markets

    3 Themes That Will Shape Markets This Quarter

    Fears of a global recession hit markets hard at the start of the year. Yet the anxiety has waned.
RELATED FAQS
  1. What happens if interest rates increase too quickly?

    Learn about what happens if interest rates rise too fast and understand what goes into the Fed’s decision to adjust interest ... Read Answer >>
  2. When was the last time the Federal Reserve hiked interest rates?

    Learn about when the U.S. Federal Reserve last increased the federal funds target rate, which was in June 2006 after the ... Read Answer >>
  3. Do lower interest rates increase investment spending?

    Learn how the Federal Reserve Board uses monetary policy and the federal funds rate to influence long-term interest rates ... Read Answer >>
  4. How is the Federal Reserve audited?

    Learn how the Federal Reserve gets audited. Due to gridlock, the Federal Reserve has been forced to take on the role of stimulating ... Read Answer >>
  5. Who decides when to print money in the US?

    Learn who decides to print money in the United States. Many people relate credit creation, which is the Fed's job, with printing ... Read Answer >>
  6. Why do some people claim the Federal Reserve is unconstitutional?

    Learn why some people believe it was unconstitutional for the government to establish the Federal Reserve Bank and why they ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center