Prior to March 2020, the Legal Reserve requirement varied depending on the size of an individual bank.
What are the bank reserve requirements?
- Banks and other depository institutions are required by the Federal Reserve to maintain a certain amount of reserves against their obligations.
- Currently, a bank's demand and checking deposits are equivalent to 10% of the marginal reserve requirement.
- The amount of money that a bank must have in reserve in order to pay its obligations in the event of unforeseen withdrawals is known as the reserve requirement.
- The central bank uses reserve requirements as a tool to alter the amount of money in the economy and affect interest rates.
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