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 FAQS
  1. How do central banks acquire currency reserves and how much are they required to ...

    A currency reserve is a currency that is held in large amounts by governments and other institutions as part of their foreign ... Read Full Answer >>
  2. What are the Federal Reserve's guidelines on demand deposit accounts?

    Section 19 of the Federal Reserve Act of 1913 authorizes the Federal Reserve Board to impose reserve requirements on the ... Read Full Answer >>
  3. How do you calculate shareholder equity?

    Shareholders' equity is listed on a company's balance sheet and measures its net worth. A company's shareholders' equity ... Read Full Answer >>
  4. What is the difference between earnings and profit?

    Earnings, specifically retained earnings, and profit are often used as synonyms in corporate finance, although they are different ... Read Full Answer >>
  5. What is each party's role in a reverse repurchase agreement?

    There are two principal parties in a reverse repurchase agreement. The first party, often called the seller, is offering ... Read Full Answer >>
  6. How is minimum transfer price calculated?

    A company that transfers goods between multiple divisions needs to establish a transfer price so that each division can track ... Read Full Answer >>
Related Articles
  1. Economics

    Calculating Net Realizable Value

    An asset’s net realizable value is the amount a company should expect to receive once it sells or disposes of that asset, minus costs from its disposal.
  2. Markets

    Rising Interest Rates: Who it Helps, Who it Hurts

    When interest rates rise, the impact hits some of us differently. Here's why.
  3. Stock Analysis

    3 Stocks To Buy and Hold For the Rest of 2015

    One of the dominant themes to consider for 2015 is the normalization of monetary policy as the Fed raises interest rates.
  4. Economics

    Greece Isn’t The Only Problem U.S. Stocks Face

    Both stocks and bonds fell last week, due to several factors dampening investor sentiment. The most obvious one is the evolving situation in Greece.
  5. Entrepreneurship

    Fed Raising Rates Affects Startup Funding

    With interest rates having nowhere else to go but up, the Fed’s impending interest rate raise will likely begin to reverse the flow of startup funding.
  6. Investing Basics

    Calculating Unlevered Free Cash Flow

    Unlevered free cash flow (UFCF) is the free cash flow of a business before interest payments.
  7. Taxes

    Understanding Write-Offs

    Write-off has different meanings depending on the context in which it is used, but generally refers to a reduction in value due to expense or loss.
  8. Economics

    Explaining the Reserve Ratio

    Reserve ratio is the amount of cash a bank must keep in its bank vaults or deposit into a central, governing bank.
  9. Economics

    What are Capital Goods?

    Capital goods are assets with a useful life of more than one year that are used for the production of income.
  10. Economics

    Understanding Capital Assets

    A capital asset is one that a company plans on owning for more than one year, and uses in the production of revenue.

You May Also Like

Hot Definitions
  1. Radner Equilibrium

    A theory suggesting that if economic decision makers have unlimited computational capacity for choice among strategies, then ...
  2. Inbound Cash Flow

    Any currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow ...
  3. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  4. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  5. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  6. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!