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They would hold excess reserves when conditions are such that they earn very little, or risks of loss are greater than interest reward or as now, 2/1/12, when the Federal Reserve is actually paying interest to the banks to keep reserves. There's now about $1.4 trillion of excess reserves of banks held at the Fed. It resulted from the Fed stuffing the bank "persons" with money lent at near zero interest to replace that which the banks destroyed with the liar loans and CDO- CDS securities. While 13 million human persons are unemployed, it's nutty to maintain such credit scarcity. But that's "free enterprise."
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∙ 12y ago
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Why do banks try to keep excess reserves as low as possible?
Because, the excess reserves they hold are going to stay idle in their vaults (safe deposit boxes) and are not going to earn any money for them. Instead if they loan it out to customers, they can earn an interest on the same. So banks try to keep their excess reserves as low as possible.
Which of the following most accurately describes what banks do with their excess reserves?
Banks use excess reserves to make loans to customers so that they can make profits on the interest.
What is a reserve rate?
The amount of funds that banks must hold in reserves
Why does a bank sometimes hold excess reserves?
to be sure it can meet its customers' demands
When all banks have zero excess reserves to start and you write a check that is deposited in another bank it is true that?
the system will have decreased its reserves. due to the fact that a check is a liability that the bank has to cover for. does anyone else have a better explanation? lol
Why do banks try to keep excess reserves as low as possible?
Because, the excess reserves they hold are going to stay idle in their vaults (safe deposit boxes) and are not going to earn any money for them. Instead if they loan it out to customers, they can earn an interest on the same. So banks try to keep their excess reserves as low as possible.
What banks do when they do not have excess reserves?
reserving bank
Which of the following most accurately describes what banks do with their excess reserves?
Banks use excess reserves to make loans to customers so that they can make profits on the interest.
What do banks do with their excess reserves?
Banks use excess reserves to make loans to customers so that they can make profits on the interest Commercial banks cannot use excess reserves to make common loans. They can only use them to make loans to other banks who may need more required reserves. Excess reserves increase the monetary base but do not enter the M1 or M2 money supply. The only entity that can effect the total excess reserves is the Federal Reserve. When the fed decides to reduce its balance sheet, it will sell assets in the market and reduce an equal amount of excess reserves.
What are the funds that banks use to satisfy the reserve requirement?
excess reserves
When To Release The Reserves Withholdings?
Excess reserves will be released two times a year after initial hold.
As commercial banks keep more excess reserves, what happens to money creation?
It decreases.
What is a reserve rate?
The amount of funds that banks must hold in reserves
Why does a bank sometimes hold excess reserves?
to be sure it can meet its customers' demands
When corporations retire or pay off loans from commercial banks do excess reserves increased or decreased?
DECREASE
The main functions of the National Bank of Ethiopia?
To license & supervise banks & hold commercial banks reserves & lend money to them.
What are excess reserves?
They are reserves of cash more than the required amounts.
