Reserve Requirements

What Does Reserve Requirements Mean?
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.

Filed Under: Banking, Economics

Related Terms

Bank Run
Book Balance
Discount Rate
Federal Funds Rate
Federal Reserve Bank
Federal Reserve Open Market Committee - FOMC
Fractional-Reserve Banking
Monetary Policy
Multiplier Effect
Open Market Operations
More Related Terms

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