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Banks are required to have reserves. Reserves are mostly held as US Treasuries.
by nostromo 4y ago
Banks are required to have reserves. Reserves are mostly held as US Treasuries.
- pphysch 4y agoGotcha.
- mikeyouse 4y agoPost GFC, regulators started assigning risk weightings to bank assets — cash and treasury bills are “riskless” by this metric, most other things aren’t. So if you need $100 of reserves, that can be $100 of treasuries or $200 of car loans or $400 of mortgage backed securities. For obvious reasons, their balance sheets are heavily invested in treasuries now. https://www.investopedia.com/terms/t/tier-1-capital-ratio.asp https://www.investopedia.com/terms/t/tier-1-capital-ratio.as...
- lxgr 4y agoAren't bank reserves normally cash (or equivalently central bank deposits)?