Required reserves constitute a monetary policy instrument which a central bank uses to varying degrees depending on the conditions of the financial system.

The degree of monetary policy tightening using this instrument is determined by the required reserve ratio, which may be uniform or differentiated, and by the reserving base to which the ratio is applied. To this effect, reserve requirement may be applied to either total or fraction of deposits, or reservable liabilities may include other categories, such as liabilities in respect of loans and proceeds derived from securities issued.

By changing the reserve ratio, the central bank induces a reduction or expansion of commercial banks’ lending potential, and withdrawal and/or creation of liquidity. In market economies, required reserve ratio is used as an instrument for regulating bank credit potential rather than bank liquidity.

The National Bank of Serbia uses reserve requirements only as a supportive instrument when the effects of all other market-based measures for monetary regulation are exhausted. Decisions on the level of reserve ratios and the reserving base are taken by the National Bank of Serbia’s Executive Board.

Current required reserve ratios

	Up to 2 years	Over 2 years
In dinars	5%	0%
In foreign currency	20%	13%
In foreign currency – foreign currency-indexed liabilities in dinars	100%	100%

Required reserve allocations

In dinars	Amount calculated by applying the ratio (5%) to dinar sources of funding with maturity up to two years 38% of the amount calculated by applying the ratio to foreign currency sources of funding with maturity up to two years, in dinar equivalent 30% of the amount calculated by applying the ratio to foreign currency sources of funding with maturity over two years, in dinar equivalent
In foreign currency	62% of the amount calculated by applying the ratio to foreign currency sources with maturity up to two years 70% of the amount calculated by applying the ratio to foreign currency sources with maturity over two years

Required Reserves

Current required reserve ratios

Required reserve allocations

Regulations

Required reserve base

Calculation of required reserves in dinars and euros

Allocation of dinar and foreign currency required reserves

Required reserves maintenance period and averaging

Interest on required reserves

Daily banking sector liquidity

Changes in required reserve levels since January 2005