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Required ReservesRequired reserves are the amount of funds that banks are required to keep on deposit in accounts designated for such purpose by the central bank. 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
Required reserve allocations
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