Reserve Requirements

AAA

DEFINITION of 'Reserve Requirements'

Requirements regarding the amount of funds that banks must hold in reserve against deposits made by their customers. This money must be in the bank's vaults or at the closest Federal Reserve bank.

Also known as "required reserves."

INVESTOPEDIA EXPLAINS 'Reserve Requirements'

Set by the Fed's board of governors, reserve requirements are one of the three main tools of monetary policy. The other two tools are open market operations and the discount rate.

RELATED TERMS
  1. Discount Rate

    The interest rate charged to commercial banks and other depository ...
  2. Federal Reserve Bank

    The central bank of the United States and the most powerful financial ...
  3. Federal Funds Rate

    The interest rate at which a depository institution lends funds ...
  4. Book Balance

    Funds on deposit prior to any adjustment for check clearing, ...
  5. Fractional Reserve Banking

    A banking system in which only a fraction of bank deposits are ...
  6. Federal Open Market Committee - ...

    The branch of the Federal Reserve Board that determines the direction ...
Related Articles
  1. Economics

    The Federal Reserve

    Few organizations can move the market like the Federal Reserve. As an investor, it's important to understand exactly what the Fed does and how it influences the economy.
  2. It takes two to tango, but unless both partners move in perfect cohesion, a sequence of graceful maneuvers can be reduced to a series of clumsy moves.
    Forex Education

    Why China's Currency Tangos With The USD

    Investopedia explains: It takes two to tango, but unless both partners move in perfect cohesion, a sequence of graceful maneuvers can be reduced to a series of clumsy moves. The latter depiction ...
  3. Personal Finance

    How The Federal Reserve Manages Money Supply

    Find out how the Fed manages bank reserves and this contributes to a stable economy.
  4. Forex

    How do central banks acquire currency reserves and how much are they required to hold?

    A currency reserve is a currency that is held in large amounts by governments and other institutions as part of their foreign exchange reserves. Reserve currencies usually also become the international ...
  5. Investing

    How do central banks inject money into the economy?

    Central banks use several different methods to increase (or decrease) the amount of money in the banking system. These actions are referred to as monetary policy. While the Federal Reserve Board ...
  6. Economics

    What is the difference between monetary policy and fiscal policy?

    Examine some of the important and understated differences between how fiscal policy and monetary policy impact a nation's economy.
  7. Economics

    Under what circumstances will a government change its monetary policy?

    Learn about the kind of variables, including political and theoretical factors, that can bring about change in a government's monetary policy.
  8. Economics

    How does monetary policy influence inflation?

    Take a deeper look at how contemporary central banks attempt to target and control the level of inflation through monetary policy tools.
  9. There are many ways to rank the word's most powerful companies. Looking at market value, brand value or sales revenue are all methods used to rank the biggest companies in the world.
    Economics

    Most Powerful And Influential Public Companies In 3 Metrics

    There are many ways to rank the word's most powerful companies. Looking at market value, brand value or sales revenue are all methods used to rank the biggest companies in the world.
  10. A look at China's plan to control population growth and how it could change going forward.
    Economics

    China's One-Child Policy Explained

    A look at China's plan to control population growth and how it could change going forward.

You May Also Like

Hot Definitions
  1. Risk-Free Rate Of Return

    The theoretical rate of return of an investment with zero risk. The risk-free rate represents the interest an investor would ...
  2. Scarcity

    The basic economic problem that arises because people have unlimited wants but resources are limited. Because of scarcity, ...
  3. Trust Fund

    A trust fund is a fund comprised of a variety of assets intended to provide benefits to an individual or organization. The ...
  4. Christmas Tree

    An options trading strategy that is generally achieved by purchasing one call option and selling two other call options at ...
  5. Christmas Club

    A short-term savings account that usually pays out the full account balance to its account holders once each year, right ...
  6. Boston Snow Indicator

    A market theory that states that a white Christmas in Boston will result in rising stock prices for the following year. For ...
Trading Center