Central Bank Balances And Reserve Requirements

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.

Reserve requirements are widely used by central banks as a means to improve monetary control, an instrument for policy implementation, a source of revenue, and a safeguard of bank liquidity. The effectiveness of reserve requirements in fulfilling these functions is reviewed, and the detailed modalities of their use are examined. Reserve requirements in a sample of developing countries are described.

Drawing from their 2018 conference, the Hoover Institution brings together leading academics and monetary policy makers to share ideas about the practical issues facing central banks today. The expert contributors discuss U.S. monetary policy at individual central banks and reform of the international monetary and financial system. The discussion is broken down into seven key areas: 1) International Rules of the Monetary Game; 2) Banking, Trade and the Making of the Dominant Currency; 3) Capital Flows, the IMF's Institutional View and Alternatives; 4) Payments, Credit and Asset Prices; 5) Financial Stability, Regulations and the Balance Sheet; 6) The Future of the Central Bank Balance Sheet; and 7) Monetary Policy and Reform in Practice. With in-depth discussions of the volatility of capital flows and exchange rates, and the use of balance sheet policy by central banks, they examine relevant research developments and debate policy options.

Provides an in-depth overview of the Federal Reserve System, including information about monetary policy and the economy, the Federal Reserve in the international sphere, supervision and regulation, consumer and community affairs and services offered by Reserve Banks. Contains several appendixes, including a brief explanation of Federal Reserve regulations, a glossary of terms, and a list of additional publications.

Given the rapidly declining demand for central bank reserves and their gradual replacement in wholesale payments by alternative forms of money—clearinghouse moneyand treasury money—this paper discusses whether the complete extinction of base money could undermine monetary control. It argues that such concerns are misplaced since central banks can target interest rates and inflation even in the absence of base money. The paper explores implications for current and future central banking, including monetary and foreign exchange operations, lender of last resort, coordination between public debt and monetary management, and design of operating rules in currency boards.

This book addresses the welfare gains and costs of accumulating foreign exchange reserves and the implications for the functioning of the global financial system. The tremendous growth of central bank reserves has led to an increased focus on raising returns in addition to the traditional preference central banks have for maintaining liquid portfolios. Issues such as asset and currency diversification, the impact of new accounting rules and the profit distribution agreements with the government are analysed, adding new insights to the current debate on the optimal size of central bank reserves. This book brings together a wide range of experts from central banks, investment banks and the academic community.