Secondary Reserves

Assets invested in short-term marketable securities, usually Treasury bills and short-term government securities. Legal Reserves kept in a Federal Reserve Bank don't earn interest, but secondary reserves are a source of supplemental liquidity. These earn interest and can be used to adjust a bank's reserve position. If loan demand is slow, deposit funds often are invested in short-term securities that are easily converted to cash. Secondary reserves are not listed as a separate balance sheet item. See also Managed Liabilities; Reserve Requirements.