Reserve requirement

How it is used

Used in central banking, treasury and economic news. The central bank raises or lowers reserve requirement ratios, often differently by currency and maturity, to steer credit growth and liquidity. Higher requirements leave banks less money to lend. Some central banks use them actively; others hardly use them at all.

Example sentences

1. The central bank raised the reserve requirement on foreign currency deposits.

2. Treasury must hold enough lira to meet the reserve requirement in every maintenance period.

Common collocations

• reserve requirement ratio
• raise reserve requirements
• required reserves
• maintenance period

Related terms

• central bankA country's or region's main monetary authority, which issues money, sets the policy interest rate and works to keep prices and the financial system stable.
• liquidityHow easily an asset can be turned into cash without losing value, or how much cash and easily sold assets a bank or company has to meet its payments.
• policy rateThe main interest rate set by a central bank to steer the cost of money in the economy and bring inflation towards its target.
• depositMoney that you put into a bank account, or the act of putting it there. For a bank, customer deposits are its main source of funding.
• regulatorA public body that makes and enforces the rules for an industry. Banking regulators license banks, set capital rules and inspect banks.

More terms: Regulation & Compliance

• compliance
• KYC
• money laundering
• fraud
• AML
• capital adequacy ratio
• suspicious transaction report
• Basel III
• sanctions
• terrorist financing
• PEP
• beneficial owner