Central Bank Balances and Reserve Requirements

February 1, 2011

Preview Citation

Format: Chicago

Simon T Gray. Central Bank Balances and Reserve Requirements, (USA: International Monetary Fund, 2011) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Most central banks oblige depository institutions to hold minimum reserves against their liabilities, predominantly in the form of balances at the central bank. The role of these reserve requirements has evolved significantly over time. The overlay of changing purposes and practices has the result that it is not always fully clear what the current purpose of reserve requirements is, and this necessarily complicates thinking about how a reserve regime should be structured. This paper describes three main purposes for reserve requirements - prudential, monetary control and liquidity management - and suggests best practice for the structure of a reserves regime. Finally, the paper illustrates current practices using a 2010 IMF survey of 121 central banks.

Subject: Banking, Central bank policy rate, Commercial banks, Currencies, Reserve requirements

Keywords: Excess reserves, Exchange rate, Foreign currency, Liquidity management, Vault cash, WP

Publication Details

Pages:

56
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/036
Stock No:

WPIEA2011036
ISBN:

9781455217908
ISSN:

1018-5941

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