looking for term for a banking concept

English translation: required reserve ratio

GLOSSARY ENTRY (DERIVED FROM QUESTION BELOW)
English term or phrase:looking for term for a banking concept
English translation:required reserve ratio
Entered by: Martin Perazzo

19:39 Apr 27, 2005
English to English translations [PRO]
Business/Commerce (general)
English term or phrase: looking for term for a banking concept
Banks are obliged by law to keep a certain percentage of liquid funds available, in other words this money has to be left there, unused, and not earning anything, becuase it simply has to be available. The reason is to cover the possibility of a 'run' when a number of deposit holders might want to close their accounts all at once.

I seem to rmember years ago when i studied business that there was a specific term for this, but can't remember for the life of me (In Es it's ratio de cobertura, 'coverage ratio')

TIA:-)
Lia Fail (X)
Spain
Local time: 17:39
reserve ratio, required reserve ratio
Explanation:
Thousands of Google hits, you'll find definitions in any number of the listed sites...
Selected response from:

Martin Perazzo
Spain
Local time: 17:39
Grading comment
thanks to all:-)
4 KudoZ points were awarded for this answer



Summary of answers provided
5 +3reserve ratio, required reserve ratio
Martin Perazzo
3 +3statutory reserve?
Lawyer-Linguist
4 +1reserve requirements
marybro
3liquid reserves?
Kim Metzger


Discussion entries: 1





  

Answers


5 mins   confidence: Answerer confidence 3/5Answerer confidence 3/5
liquid reserves?


Explanation:
I'm not a financial expert, Ailish, but maybe this is the term you seek.
---
"Sound" banks limit the volume of the loans they extend so that they remain in a prudent proportional relationship to the amount of instantly liquid funds they have available in "reserves" (either as currency in the vault or as demand deposits in some other bank, such as the Federal Reserve). But bankers face a difficult trade-off. The flow of checks that will be presented for payment and the volume of new deposits and loan repayments coming in every day cannot be predicted with 100% accuracy, so the higher the fraction of its total deposit obligations the bank holds ready in reserves, the safer or "sounder" the bank can be considered (and the more attractive the bank will seem to depositers and other potential business associates). However, reserves do not yield any interest income to the bank; only the funds that are tied up in loans to (solvent) borrowers can contribute directly and immediately to the bank's profitability. To maximize their profits, bank management must find the best way to strike a balance between the need to maintain their "reserve ratio" at a level high enough to limit their risks of becoming insolvent and the conflicting need to keep the highest feasible proportion of the bank's available funds loaned out at interest.
http://www.auburn.edu/~johnspm/gloss/banking


Kim Metzger
Mexico
Local time: 10:39
Specializes in field
Native speaker of: Native in EnglishEnglish
PRO pts in category: 68
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35 mins   confidence: Answerer confidence 5/5 peer agreement (net): +3
reserve ratio, required reserve ratio


Explanation:
Thousands of Google hits, you'll find definitions in any number of the listed sites...

Martin Perazzo
Spain
Local time: 17:39
Specializes in field
Native speaker of: Native in EnglishEnglish, Native in SpanishSpanish
PRO pts in category: 4
Grading comment
thanks to all:-)

Peer comments on this answer (and responses from the answerer)
agree  Robert Donahue (X): Essentially the same thing as "reserve requirements". You need the "required" in there too since they are legally obligated to do this.
15 mins

agree  Charlesp: yes, this is it.
37 mins

agree  Alfa Trans (X)
2 days 15 hrs
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2 mins   confidence: Answerer confidence 3/5Answerer confidence 3/5 peer agreement (net): +3
statutory reserve?


Explanation:
sounds like a possibility

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Note added at 3 mins (2005-04-27 19:43:28 GMT)
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As the Bank of Zambia reduces statutory reserve requirements it is ... the Bank
of Zambia has decided to reduce the Statutory Reserve Ratios on both ...
www.boz.zm/Media/ReducingStatutoryRR311003.htm - 12k - Cached - Similar pages

State Bank of Pakistan - The Central Bank
About the BAnk - Statutory Obligations ... Presently the requirement is 15% (excluding
5% statutory cash reserve) of the total of its time and demand ...
www.sbp.org.pk/about/ordinance/statutor.htm - 17k - Cached - Similar pages

statutory reserve deposits (SRD)
statutory reserve deposits (SRD):. The reserves that the central bank in Australia
required the commercial banks to hold before deregulation.



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Note added at 1 hr 11 mins (2005-04-27 20:50:46 GMT)
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FINAL: STATUTORY RESERVE RATIO

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Note added at 1 hr 17 mins (2005-04-27 20:57:03 GMT)
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also known as SRR = statutory reserve ratio OR statutory reserve requirement


commercial banks to meet their mandatory 4 per cent Cash Reserve Ratio ... 20 per cent statutory reserve ratio (SRR) in terms of cash reserve ratio ...
www.weeklyholiday.net/210202/front.html - 48k - Cached - Similar pages


[PDF] Sri Lanka Letter of Intent, Memorandum of Economic and Financial ...File Format: PDF/Adobe Acrobat - View as HTML
... Reserve money. Currency in circulation. Commercial bank deposits ... of statutory reserve requirement on foreign currency deposits by commercial banks. ...
www.imf.org/External/NP/LOI/2002/lka/01/040102tmu.pdf - Similar pages


Public Information Notice: IMF Concludes Article IV Consultation ...... coconut sector and a drawdown of net foreign assets by commercial banks. ... statutory reserve requirement (SRR) with a 16 percent prescribed reserve ...
www.imf.org/external/np/sec/pn/2000/pn0072.htm - 30k - Cached - Similar pages


About the SEACEN Centre... The CBSL decided to abolish the statutory reserve requirement (SRR) on all foreign currency deposits placed with commercial banks with effect from 4 ...
www.seacen.org/newsletter/ 2000-3rdQtr/nbfd-srilanka.aspx - 18k - Cached - Similar pages


NEAC... rate (BLR) of commercial banks is around 12 per cent in mid-March 1998. ... the Statutory Reserve Requirement (SRR) for banks and institutions was ...




Lawyer-Linguist
Portugal
Local time: 16:39
Specializes in field
Native speaker of: English
PRO pts in category: 36

Peer comments on this answer (and responses from the answerer)
agree  Victor Potapov: I was actually going to say "reserve of liquid funds" but hit "refresh" just in case - and saw your answer...
1 min
  -> thanks Victor

agree  Java Cafe
3 mins
  -> thanks!

agree  Mihaela Brooks
9 hrs
  -> thanks :-)
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4 mins   confidence: Answerer confidence 4/5Answerer confidence 4/5 peer agreement (net): +1
reserve requirements


Explanation:
sug.
is that the Fed creates new bank reserves, and banks lend them out. ...
with the emergence of money market funds, which require no reserve requirements
hussmanfunds.com/html/fedirrel.htm

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Note added at 6 mins (2005-04-27 19:45:49 GMT)
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the funding of a central bank as compared to a commercial bank seems
... as the authorities rely less on lower reserve requirements to manage
www.reservebank.co.za/.../8686805798A4AC1842256FAF00455C33/ $File/How+central+banks+manage+their+finances.pdf

The reserve requirements are set by the Central Bank Reserve, reserve requirements
www.libertocracy.com/PoliveriumE-2/E-2Sectors/ E-2Capitalium/E-2EconomyX/BankMoney/policy.htmhave been applied only to transaction deposits


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Note added at 2 hrs 33 mins (2005-04-27 22:13:16 GMT)
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Reserve requirements
Requirements regarding the amount of funds that banks must hold in reserve against deposits made by their customers. This money must be in the bank\'s vaults or at the closest Federal Reserve Bank.
http://www.answers.com/reserve requirement

Reserve requirements affect the potential of the banking system to create transaction deposits. If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+...=$1,000). In contrast, with a 20% reserve requirement, the banking system would be able to expand the initial $100 deposit into a maximum of $500 ($100+$80+$64+$51.20+...=$500). Thus, higher reserve requirements should result in reduced money creation and, in turn, in reduced economic activity.



marybro
Local time: 11:39
Specializes in field
Native speaker of: English
PRO pts in category: 12

Peer comments on this answer (and responses from the answerer)
agree  Robert Donahue (X): Reserve requirements, a tool of monetary policy, are computed as percentages of deposits that banks must hold as vault cash or on deposit at a Federal Reserve Bank. http://www.ny.frb.org/aboutthefed/fedpoint/fed45.html Nice explanation here! : )
3 mins
  -> thanks, Robert!
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