Bank reserves

'Bank reserves' are a commercial banks' holdings of deposits in accounts with a central bank (for instance the European Central Bank or the applicable branch bank of the Federal Reserve System, in the latter case including federal funds), plus currency that is physically held in the bank's vault ("vault cash").[1] Some central banks set minimum reserve requirements, which require banks to hold deposits at the central bank equivalent to at least a specified percentage of their liabilities such as customer deposits. Even when there are no reserve requirements, banks often opt to hold some reserves—called desired reserves—against unexpected events such as unusually large net withdrawals by customers or bank runs.

In relation to bookkeeping, the term is a misnomer. Reserves are ordinarily part of the equity of the company and are therefore liabilities. Bank reserves, on the other hand, are part of the bank's assets. In a bank's annual report, bank reserves are referred to as "cash and balances at central banks".

Terms

Notes

  1. In the case of the Federal Reserve System in the United States, see, e.g., Regulation D, at 12 C.F.R. sec. 204.5(a) and 12 C.F.R. sec. 204.2(k).
  2. See, e.g., U.S. Federal Reserve System regulation at 12 C.F.R. section 204.5(a)(1)(i).
  3. See, e.g., U.S. Federal Reserve System regulations at 12 C.F.R. section 204.5(a)(1) and 12 C.F.R. section 204.2.
  4. See, e.g., U.S. Federal Reserve System regulation at 12 C.F.R. section 204.4.
  5. Vogel 2001:421.

See also

References

Vogel, Harold L. (2001). Entertainment Industry Economics: A Guide for Financial Analysis. New York: Cambridge University Press. ISBN 0-521-79264-9

External links

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