Reserve Ratio
The portion (expressed as a percent) of depositors' balances banks must have on hand as cash. This is a requirement determined by the country's central bank, which in the U.S. is the Federal Reserve. The reserve ratio affects the money supply in a country.
This is also referred to as the "cash reserve ratio" (CRR). Investopedia Says:
For example, if the reserve ratio in the U.S. is determined by the Fed to be 11%, this means all banks must have 11% of their depositers' money on reserve in the bank. So, if a bank has deposits of $1 billion, it is required to have $110 million on reserve. Related Terms:
Bank Of Canada - BOC
Central Bank
Federal Reserve Board - FRB
Federal Reserve System
Fractional-Reserve Banking
Monetary Policy
Multiplier Effect
Reserve Requirements |