Legal reserve

Definition of Legal Reserve Requirement

Legal Reserve Requirement ...

Legal Reserve
Definition: Minimum amount a financial institution is required to have on hand to meet its deposits' demands.

LEGAL RESERVES
The combination of vault cash and Federal Reserve deposits that banks can legally use to satisfy government reserve requirements.

the minimum legal reserve requirement to 6.5% of deposits, from 7.5%.
Basel II
Key Concepts ...

LEGAL RESERVE Under the civil law of some countries corporations are required to maintain a legal reserve for all needs which may arise in the course of the business. Tax law does not allow a deduction for such a reserve.

The faults of the National Banking System, especially perversely elastic bank notes-the paradox of dispersed legal reserves that were unhappily drawn as if by a magnet to finance stock speculation in New York-and the lack of a central bank to deal ...

portion of their deposits banks and savings institutions are required to maintain as legal reserves for the protection of depositors.

Even in trying to control the supply side of the loan market, it is easier for the Fed to force the banks to tighten credit and make fewer new loans (by raising the legal reserve requirements, for example) than it is to convince them to extend a ...

Even if there were no legal reserve requirements for banks, they would still maintain required clearing balances as reserves with the Federal Reserve, whose ability to control the volume of deposits would not be impaired.

Each member bank is required to own stock in the Federal Reserve bank of its district and must maintain legal reserves on deposit with the district reserve bank.

[17] Countries have also implemented legal reserve requirements which impose minimum reserve requirements on banks.[18] Mainstream economists believe[17] that these monetary reforms have made sudden disruptions in the banking system less frequent.

Legal reserves and surplus are maintained to provide payment of all claims.

See also: Banks, Reserve requirements, Vault cash, Feedback, Tip