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interestingly, the Fed's page on Reserve Requirements states: As announced on March 15, 2020, the Board reduced reserve requirement ratios to zero percent
by ArnoVW 2y ago
interestingly, the Fed's page on Reserve Requirements states:
As announced on March 15, 2020, the Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions.
So in effect, the multiplier is infinity.
https://www.federalreserve.gov/monetarypolicy/reservereq.htm https://www.federalreserve.gov/monetarypolicy/reservereq.htm
- gastonmorixe 2y agoI remember this. Have they ever rolled it back?
- neffy 2y agoThe Basel Capital rules dominate at the moment. If that ever gets rolled back... buy gold immediately.
- gastonmorixe 2y agoOh ok. So there’s a difference between reserve requirements and capital requirements. Capital requirements are still in place Basel III (Basel Capital Rules) 4.5% among other requirements https://en.m.wikipedia.org/wiki/Basel_III https://en.m.wikipedia.org/wiki/Basel_III
- hgomersall 2y agoBasel III also specifies liquidity requirements, which basically means banks need to hold sufficient loan assets in the government or central bank (generally bonds or reserves respectively), which act as a backstop if other banks stop lending to them (i.e. stop accepting deposit transfers without also being given an equivalent asset).
- ta12653421 2y agonot really infinity: there are tons of balance-sheet-metrics which have to be aligned, in theory you are right; in practice, there are a lot differences.