Banks primary reserves
What are a bank's primary reserves? When the Fed sets reserve requirements, what is its primary goal?
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Deposits in the bank's account at the Fed and Vault cash are utilized to fulfil these reserve needs, known as primary reserves. These primary reserves are assets which are not earning interest by financial institutions.
The Federal Reserve involves all commercial banks to maintain a minimum amount of reserve money on hand to meet the demands of its depositors for withdrawal and to pay for other requirements. Many people consider this reserve requirement as monetary policy requirements more than banks requirements.
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