Working Reserves


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.

BREAKING DOWN '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.

  1. Asset Valuation Reserve - AVR

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  2. Free Reserves

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  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 ...
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