Incompatible Browser
Looks like this browser isn't supported. We recommend you use Chrome, Firefox, or Safari instead.
  • Print
  • Email

Chicago Fed Letter, No. 253, August 2008
Sweep Activity: Managing Bank Reserves in the Seventh District
The U.S. Federal Reserve System imposes reserve requirements on banks and other depository institutions. Reserve requirements perform a critical support function in the financial system. They help ensure a stable, predictable demand for reserves, which in turn enables the Federal Reserve to achieve policy objectives by controlling the supply of reserves. However, this comes at a cost. If banks do not have enough cash in their vaults to satisfy reserve requirements, calculated as a percentage of specified deposit liabilities, they must hold additional non-interest-bearing reserves on deposit at the Federal Reserve. As such, reserve requirements represent an implicit tax on deposits, since funds held to satisfy these requirements cannot be allocated to interest-bearing assets.
Having trouble accessing something on this page? Please send us an email and we will get back to you as quickly as we can.

Federal Reserve Bank of Chicago, 230 South LaSalle Street, Chicago, Illinois 60604-1413, USA. Tel. (312) 322-5322

Copyright © 2021. All rights reserved.

Please review our Privacy Policy | Legal Notices