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Elenna [48]
3 years ago
11

What are reserve requirements?

History
1 answer:
NISA [10]3 years ago
4 0

Answer:

Reserve Requirements

By JAMES CHEN

Fact checked by MARCUS REEVES

Reviewed by KHADIJA KHARTIT on August 29, 2021

What Are Reserve Requirements?

Reserve requirements are the amount of cash that banks must have, in their vaults or at the closest Federal Reserve bank, in line with deposits made by their customers. Set by the Fed's board of governors, reserve requirements are one of the three main tools of monetary policy—the other two tools are open market operations and the discount rate.

On March 15, 2020, the Federal Reserve Board announced that reserve requirements ratios would be set to 0%, effective March 26, 2020. Prior to the change effective March 26, 2020, the reserve requirement ratios on net transactions accounts differed based on the amount of net transactions accounts at the institution.1

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