Minimum standards of the Lamfalussy Report and Reserve requirements: Difference between pages

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The six minimum standards for the design and operation of cross-border and multi-currency netting schemes or systems.  
''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.


The standards are:
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.


i. Netting systems should have a well-founded legal basis under all relevant jurisdictions.


ii. Netting scheme participants should have a clear understanding of the impact of the particular scheme on each of the financial risks affected by the netting process.
The greatest possible ratio would be 100%. This is known as '100% reserve banking'.


iii. Multilateral netting systems should have clearly defined procedures for the management of credit risks and liquidity risks which specify the respective responsibilities of the netting provider and the participants. These procedures should also ensure that all parties have both the incentives and the capabilities to manage and contain each of the risks they bear and that limits are placed on the maximum level of credit exposure that can be produced by each participant.
Any smaller ratio is known as 'fractional reserve banking'.
 
iv. Multilateral netting systems should, at a minimum, be capable of ensuring the timely completion of daily settlements in the event of an inability to settle by the participant with the largest single net debit position.
 
v. Multilateral netting systems should have objective and publicly disclosed criteria for admission which permit fair and open access; and
vi. All netting schemes should ensure the operational reliability of technical systems and the availability of backup facilities capable of completing daily processing requirements.
 
 
''Also known as the Lamfalussy Standards.''




== See also ==
== See also ==
* [[Admission]]
* [[Capital adequacy]]
* [[Bank for International Settlements]]
* [[Central bank]]
* [[Lamfalussy Standards]]
* [[Commercial bank money]]
* [[Netting]]
* [[Fractional reserve banking]]
* [[100% reserve banking]]
* [[Monetary policy]]
* [[Interest on excess reserves]]
* [[Open market operations]]
* [[RRR]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:Accounting,_tax_and_regulation]]
[[Category:Corporate_finance]]
[[Category:Financial_products_and_markets]]
[[Category:Identify_and_assess_risks]]
[[Category:Investment]]
[[Category:Long_term_funding]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]
[[Category:The_business_context]]
[[Category:The_business_context]]

Latest revision as of 02:42, 5 February 2024

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'.


See also

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