> For the record, reserve requirements are not universal. Canada, for one, eliminate theirs in 1992: Yes! This! In fact, not only does the Canadian system hav

> For the record, reserve requirements are not universal. Canada, for one, eliminate theirs in 1992: Yes! This! In fact, not only does the Canadian system have zero reserve requirements... it has near zero reserves. https://en.wikipedia.org/wiki/Large_Value_Transfer_System https://en.wikipedia.org/wiki/Large_Value_Transfer_System How it works is this: - Banks send payments in real time. The system does not involve any transfer of assets, but it does require pledging collateral (often government debt). Asset transfers occur outside of the system. For example, if bank A sells a government debt instrument to bank B, then bank B sends a payment to bank A in the system, and then A transfers the instrument to B outside of this system. - At the end of each day, settlement is done. Each private bank has a net balance at the end of the day. The net balances sum up to zero across the system, and post-settlement, each individual bank must have a net zero balance. In order to do so, they can either send/receive payments from/to another private bank for overnight loans. Or they can deal with the central bank, by having their reserve balance credited/debited, or by getting an overnight loan from the central bank at a rate determined by the central bank. With overnight loans, no assets are transferred... there's just a promise to pay back the next day via sending a payment. A few notable things about reserves in the system: - Use of reserves is totally optional. In practice, banks hold very little reserves. - The quantity of reserves is entirely determined by demand from private banks. - Reserves are never transferred from one private bank to another. They are only transferred between central bank and private bank.