Overview
Commercial bank reserves play a vital role in the banking system by ensuring that banks can meet customer withdrawals and comply with regulatory requirements. These reserves are held at the central bank and are crucial for maintaining liquidity and financial stability. Understanding how reserves wor...
Key Terms
Example: If the reserve requirement is 10%, a bank must hold $10 for every $100 deposited.
Example: Cash is the most liquid asset a bank can hold.
Example: The Federal Reserve is the central bank of the United States.
Example: In the U.S., the FDIC insures deposits up to $250,000.
Example: Lowering interest rates to stimulate economic growth.
Example: A bank run can lead to a bank's collapse if it doesn't have enough reserves.
Related Topics
Monetary Policy
The process by which the central bank controls the money supply to achieve economic goals.
intermediateBanking Regulations
Rules that govern how banks operate and manage their reserves.
intermediateFinancial Stability
The condition where the financial system operates smoothly without crises.
advancedKey Concepts
Reserve RequirementLiquidityCentral BankDeposit Insurance