Central Bank Balances and Reserve Requirements

Author/Editor: Simon Gray
Publication Date: February 01, 2011
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: Most central banks oblige depository institutions to hold minimum reserves against their liabilities, predominantly in the form of balances at the central bank. The role of these reserve requirements has evolved significantly over time. The overlay of changing purposes and practices has the result that it is not always fully clear what the current purpose of reserve requirements is, and this necessarily complicates thinking about how a reserve regime should be structured. This paper describes three main purposes for reserve requirements - prudential, monetary control and liquidity management - and suggests best practice for the structure of a reserves regime. Finally, the paper illustrates current practices using a 2010 IMF survey of 121 central banks.
Series: Working Paper No. 11/36
Subject(s): Central bank policy | Commercial banks | Depositories | Liquidity management | Monetary policy | Reserve requirements

Author's Keyword(s): Reserve requirements | central bank | monetary control | remuneration of reserves
Publication Date: February 01, 2011
ISBN/ISSN: 9781455217908/1018-5941 Format: Paper
Stock No: WPIEA2011036 Pages: 56
US$18.00 (Academic Rate:
US$18.00 )
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