Reserve requirements: Difference between revisions
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imported>Doug Williamson m (Spacing 20/8/13) |
imported>John Grout (Cross references and distinguish vault cash from central bank balances) |
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''Banking''. | ''Banking''. | ||
The minimum ratio of cash reserves to deposits that the central bank requires commercial banks to hold. | The minimum ratio of vault cash and balances ("[[reserves]]") with the [[central bank]] to deposits taken by the bank that the central bank requires commercial banks to hold. | ||
An increase in reserve requirements will lower the supply of money in the economy as banks undertake less lending. | An increase in minimum reserve requirements will be likely to lower the supply of money in the economy as banks undertake less lending, and vice versa. | ||
== See also == | == See also == | ||
* [[Monetary policy]] | * [[Monetary policy]] | ||
Revision as of 12:28, 3 August 2014
Banking.
The minimum ratio of vault cash and balances ("reserves") with the central bank to deposits taken by the bank that the central bank requires commercial banks to hold.
An increase in minimum reserve requirements will be likely to lower the supply of money in the economy as banks undertake less lending, and vice versa.
