Working Reserves

AAA

DEFINITION of 'Working Reserves'

Reserves held by banks above the required minimum level - or cash reserve ratio - mandated by regulations and laws. Working reserves are normally in the form of vault currency, deposits at other banks, cash being collected and excess reserves held as deposits at the Federal Reserve bank. Banks typically hold a buffer of working reserves to avoid their reserves falling below the minimum required level due to large net withdrawals.




INVESTOPEDIA EXPLAINS 'Working Reserves'

Banks hold an optimum level of working reserves since inadequate working reserves would lead to avoidable interest penalties on borrowed reserves. On the other hand, an excessively high level of working reserves would mean foregoing substantial interest income on customer loans.

RELATED TERMS
  1. Asset Valuation Reserve - AVR

    Capital required to be set aside in order to cover a company ...
  2. Free Reserves

    A measurement of a bank's reserves that is equal to the difference ...
  3. Reserve Requirements

    Requirements regarding the amount of funds that banks must hold ...
  4. Excess Reserves

    Capital reserves held by a bank or financial institution in excess ...
  5. Reserve Ratio

    The portion (expressed as a percent) of depositors' balances ...
  6. Capital Adequacy Ratio - CAR

    A measure of a bank's capital. It is expressed as a percentage ...
Related Articles
  1. 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 ...
  2. Fundamental Analysis

    What's a Tangible Asset?

    Tangible assets are property owned by a business that can be touched -- they physically exist. Examples include furniture and fixtures, computer hardware, delivery equipment, leasehold improvements ...
  3. Fundamental Analysis

    Cash Flow From Operating Activities

    Cash flow from operating activities is a section of the Statement of Cash Flows that is included in a company’s financial statements after the balance sheet and income statements.
  4. Fundamental Analysis

    What are the components of shareholders' equity?

    Understanding company valuation figures, such as shareholders' equity, can be a powerful tool in assessing the financial strength of a business.
  5. Fundamental Analysis

    What is the difference between the acid test ratio and working capital ratio?

    Using liquidity ratios to determine the financial stability of a company is an important tool to accounting professionals and investors.
  6. Fundamental Analysis

    What are some examples of return on investment capital?

    Read about some basic examples of return on investment capital for publicly traded companies and companies that have a handful of investors.
  7. Bonds & Fixed Income

    What is the difference between the yield of stock and the yield of a bond?

    Explore and understand the various meanings of the investment term "yield" as it is applied to equity investments and bond investments.
  8. Fundamental Analysis

    What is the difference between cash flow and EBIDTA?

    Understand the difference between cash flow and EBITDA, and find out why cash flow is a more comprehensive metric for evaluating a company's financial health.
  9. Active Trading Fundamentals

    What is the difference between cash flow and fund flow?

    See how cash flow and fund flow differ from each other, and why fund flow can be used very differently by accountants and investors.
  10. Fundamental Analysis

    What is the difference between EBIT and operating income?

    Read about some of the subtle differences identified by the SEC between earnings before interest and taxes, or EBIT, and operating income.

You May Also Like

Hot Definitions
  1. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  2. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  4. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  5. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  6. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
Trading Center