Reserve requirements: Difference between revisions
From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson (Expand, from The Treasurer, May 2015, p15, Jeremy Warner.) |
imported>Doug Williamson (Link with Interest on excess reserves page.) |
||
| Line 13: | Line 13: | ||
== See also == | == See also == | ||
* [[Monetary policy]] | * [[Monetary policy]] | ||
* [[Interest on excess reserves]] | |||
Revision as of 15:36, 11 August 2015
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.
The greatest possible ratio would be 100%. This is known as '100% reserve banking'.
Any smaller ratio is known as 'fractional reserve banking'.
