Investor Glossary-federal reserve requirementInvestor Glossary-federal reserve requirementInvestor Glossary-federal reserve requirementInvestor Glossary-federal reserve requirementInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Federal Reserve Requirement

The HTML to link to this page
 

The federal reserve requirement is the amount of liquid assets that Federal Reserve System banks must hold. The federal reserve requirement demands that these assets be held in cash or on deposit with the Federal Reserve System. The federal reserve requirement is usually a percentage of bank's demand and time deposits. Within legal limits, the Board of Governors has sole authority over changes in the federal reserve requirement. The purpose of the federal reserve requirement is to ensure that the banks always have enough cash to pay depositors. The federal reserve requirement is also a method to increase or decrease the money supply. In theory, as the federal reserve requirement is increased, cash in the system is reduced and visa versa. As of 2005, the federal reserve requirement is 10% on "transaction deposits" and zero on time deposits and all other deposits. The federal reserve requirement is a cost to the banking system. Funds deposited to the Federal Reserve under the federal reserve requirement do not receive interest. The Federal Reserve has advocated the payment of interest on the reserves that banks maintain at the Federal Reserve Bank under the federal reserve requirement. The Federal Reserve may also impose a federal reserve requirement of any size on the amount banks in the United States owe, on a net basis, to their foreign affiliates or to other foreign banks.



Rate this Federal Reserve requirement definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: in escrow, irrevocable trust, FICO score, labor relations, required rate of return, current ratio, debt service coverage, margin rate, risk management, retained earnings, covered put, 1035 exchange, average price per share, phantom income, 144a, Key Rate Duration, implied volatility, quality assurance, cancelled check, reverse mortgage, stock market close, limit order, inflation, liquidity ratio, diluted share, command economy, option premium, EBITDA, ex-dividend, minority interest, FTSE, annual return, 401a, LIBOR, balance sheet, wholly-owned subsidiary, per diem, ex-dividend date, Zero Cost Collar, deferred revenue, stock split, 1031 exchange, VIX, real GDP, deferred tax, class C shares, open position, dividends payable, APR


Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
Investor Glossary Index >>> # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
©2004-2014 Investor Glossary - All rights reserved - Terms of Use