Excess reserves


Excess reserves

Excess reserves are bank reserves in excess of the reserve requirement set by a central bank (in the United States, a Federal Reserve Bank; in Canada, the Bank of Canada). Holding excess reserves is generally considered costly and uneconomical as no interest is earned on the excess amount. Therefore, many banks minimize their excess reserve amounts by putting them to more productive use. For banks in the Federal Reserve System, this is accomplished by making short-term (usually overnight) loans on the federal funds market to banks who may be short of their reserve requirements. However, some banks may choose to hold their excess reserves in order to facilitate upcoming transactions or meet contractual clearing balance requirements.


Wikimedia Foundation. 2010.

Look at other dictionaries:

  • Excess Reserves — Capital reserves held by a bank or financial institution in excess of what is required by regulators, creditors or internal controls. For commercial banks, excess reserves are measured against standard reserve requirement amounts set by central… …   Investment dictionary

  • excess reserves — Fin reserves held by a financial institution that are higher than those required by the regulatory authorities. As such reserves may indicate that demand for loans is low, banks often sell their excess reserves to other institutions …   The ultimate business dictionary

  • excess reserves — Higher reserves than required, held by banks. This usually undesirable state occurs as a result of poor demand for loans or high interest rates. Banks often sell excess reserves to one another …   Big dictionary of business and management

  • excess reserves — Amount of reserves held by an institution in excess of its reserve requirement and required clearing balance. Also see reserves. Bloomberg Financial Dictionary Actual reserves that exceed required reserves. Bloomberg Financial Dictionary …   Financial and business terms

  • Excess reserves — Any excess of actual reserves above required reserves. The New York Times Financial Glossary …   Financial and business terms

  • excess — 1) An initial sum which the holder of an insurance policy must bear before any claim is met by the insurer. It is most often used in car insurance, e. g. the first £50 of any claim has to be borne by the insured party. 2) A bank or other… …   Big dictionary of business and management

  • Excess Crude Account — A Nigerian government account used to save oil revenues above a base amount derived from a defined benchmark price. The Excess Crude Account was established in 2004, and its objective is primarily to protect planned budgets against shortfalls due …   Investment dictionary

  • Working Reserves — Reserves held by banks above the required minimum level or cash reserve ratio mandated by regulations and laws. Working reserves are normally in the form of vault currency, deposits at other banks, cash being collected and excess reserves held as …   Investment dictionary

  • Free reserves — Excess reserves minus member bank borrowings at the Fed. The New York Times Financial Glossary …   Financial and business terms

  • free reserves — excess reserves minus member bank borrowings at the Fed. Bloomberg Financial Dictionary …   Financial and business terms


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.