Reserve Requirements of Depository Institutions (Regulation D)

Key Points

• 1Banks are required to hold a percentage of customer deposits in reserve accounts instead of lending out all the money they receive
• 2The reserve requirement applies to checking accounts, savings accounts, and other deposit types at banks and credit unions
• 3These reserves help banks survive financial emergencies and economic downturns by ensuring they have cash available
• 4The Federal Reserve can adjust reserve requirements to influence how much money banks can lend to businesses and consumers
• 5Higher reserves mean banks lend less money (which slows the economy), while lower reserves mean more lending (which stimulates economic growth)

Key Dates