# Reserve requirement

- Canonical URL: https://www.gerhardmerk.de/reserve-requirement
- Post ID: 587349
- Modified: 2023-07-25T21:12:47+00:00
- Language: en

## Definition

Obligation of banks to hold minimum reserves with the central bank. - In the ECB's minimum reserve system, the amount of minimum reserves to be held by an institution (reserve requirement) is calculated by multiplying the institution's balance sheet items subject to reserve requirements by the respective reserve ratios. In addition, banks are allowed to deduct a lump-sum allowance from their reserve requirement. The calculation of the allowance can be adjusted to the respective credit policy objectives of the Eurosystem. - Some experts regret that the ECB hardly uses the tool of minimum reserves anymore. In many studies, the change in the minimum reserve ratio is considered to be more targeted than other monetary policy instruments; above all, it is the most likely way to influence money creation. - The ECB's Monthly Bulletin contains a detailed list of all the items relating to the minimum reserves, together with explanatory notes, under the heading "Monetary statistics" in the annex entitled "Euro area statistics". The table also compares the reserve requirement with the reserve requirement and shows the applicable interest rate for the minimum reserve. - See deduction, lump-sum, tying function, arbitrage, intertemporal, money creation willingness, excess reserves, undercutting. - See also Annual Report 2000 of the European Central Bank, pp. 71 f., Monthly Report of the Deutsche Bundesbank of July 2004, pp. 55 f., ECB Monthly Report of October 2005 (on the ECB's handling of the minimum reserve policy; overviews), ECB Monthly Report of January 2008, p. 103 (reasons why banks hold excess reserves above the minimum reserve), Deutsche Bundesbank Monthly Report of May 2008, p. 26 (ECB's handling of the minimum reserve policy to normalize the money market discarded by the subprime crisis), p. 34 f. (no braking effects of subprime lending on corporate lending). Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent! University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec. Professor Dr. Eckehard Krah, Dipl.rer.pol. E-mail address: info@ekrah.com https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk https://www.jung-stilling-gesellschaft.de/merk/ https://www.gerhardmerk.de/

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