Reserve requirements

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Revision as of 12:28, 3 August 2014 by imported>John Grout (Cross references and distinguish vault cash from central bank balances)
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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.


See also