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Actually during 2020 they removed reserve requirement to 0%. Yes really

• KallDrexx 4y ago
  Which isn't that crazy when bank reserves are at record highs, and was at relative highs when the rule was put into place. https://fred.stlouisfed.org/series/TOTRESNS https://fred.stlouisfed.org/series/TOTRESNS Banks did not want to lend out money and lowering the reserve percentage is one of the few tools they have to try to encourage banks making loans. It just so happens that it didn't do cause an uptick in loans
• Retric 4y ago
  Reserve requirements are only a question of deposits, but they limit everything from paying expenses to dividends from the exact same pool of money used to issues loans. Which is critical to understand because banks don't just offer loans they also use money for everything else normal business do. On the other hand, if they didn't need cash on hand to offer loans any random small bank could loan a 1 trillion dollars to someone. They can't because they don't actually have that money. Consider a bank with 3 billion dollars total and 2 billion in deposits. They only need to care about reserve requirements on 2 billion and can use the other 1 billion for anything because it's their money. In effect cash on hand are assets and deposits are debt. Reserve requirements are just a question of how much leverage they can legally have.