bank reserves

Bank reserves are the portion of a bank's deposits that it must hold and not lend out. They serve as a safety cushion to ensure that banks can meet withdrawal demands from customers, maintain stability, and meet regulatory requirements. Reserves can be held as cash in the bank or as deposits with the central bank. When banks have higher reserves, they have less money available for loans, which can impact the economy by limiting the amount of money circulating. Overall, reserves help promote trust in the banking system and financial stability.