What are bank reserves?

Bank reserves are the total amount of banking shares that are currently on deposit in the central bank, plus any currency currently holding in its safeguards. All banks maintain a certain type of reserve, even in countries where there is no minimum requirement for the reserve set by the national government. Although these types of resources are generally called reserves in most nations, there are some exceptions. In particular, banking reserves are usually referred to as residues Bank of England.

The presence of bank reserves is important for the stability of the banking institution. In countries where the Central Agency or Bank sets minimum reserve requirements, it is the idea of ​​creating a balance between the sources that the bank can call and the credit that the bank can safely engage in without the depositors to create disproportionate risk. Even in countries where no minimum reserve is required, banks often see the maintenance of some reserves as a sound fiscal strategy. In the situationThere are no requirements for the reserve, the funds held on the check by the bank are referred to as required reserves .

There are other benefits for bank reserves in countries where a minimum amount of reserves is required for continuing operation. In the United States, the funds maintained by the bank in the Federal Reserve Bank are known as legal reserves . This posting of deposits allows the bank to always maintain enough in the way of reserves to comply with the current regulations, and also prevent the possibility of excessive expansion of the loan and the location of the bank in an uncertain financial situation.

There are other categories of banking reserves used to classify various types of financial instruments within the US banking system. Primary reserves include a balance from checking accounts deposited with the Federal Reserve Bank AJAKE Any checks that are currentlyprocessed. Money maintained in a bank vault, monetary and coins, is also considered primary banking reserves.

Loser loss reserves are set up for the compensation of loans that are either in arrears or which were declared a bad debt. Reserves can be drawn as soon as payments for credit have not been received for at least ninety days, or at any time the bank considers the loan it will no longer be a profitable asset. Secondary banking reserves are short -term securities that can be easily converted to cash if necessary, the main example is the state treasury accounts. Reserves of this type are basically backup reserves for primary reserves and allow the bank to remain fiscal healthy, even due to highly unlikely situations that would threaten all the bank's assets.