- What Is the Reserve Ratio?
The reserve ratio is a regulation set by central banks that determines the minimum amount of reserves a commercial bank must hold, relative to its deposits. This requirement ensures that banks have enough liquidity to meet their obligations, safeguarding the financial system against potential crises. The reserve ratio is also a powerful regulatory tool. By… read more…
- What Are Reserve Requirements and Why Do They Matter?
Reserve requirements are set by central banks and dictate the minimum amount of reserves that a financial institution must hold against its deposit liabilities. Essentially, they help ensure that banks have enough liquidity to meet customer withdrawals and other obligations. By controlling the amount of money that banks can lend, reserve requirements influence interest rates… read more…