Secondary Reserves

DEFINITION of 'Secondary Reserves'

Assets that are invested in safe, marketable, short-term securities such as Treasury bills when the demand for loans is low. Secondary reserves provide a supplemental measure of low-risk liquidity. They earn interest and can be useful in adjusting a bank's reserve totals.

BREAKING DOWN 'Secondary Reserves'

Secondary reserves are often deposited in short-term instruments that can quickly be converted to cash when additional liquidity is required. However, they are not listed separately on the balance sheet.

Secondary reserves differ from legal reserves in their ability to earn interest.

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