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Fractional Reserve Banking

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Definition of Fractional Reserve Banking

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Fractional Reserve Banking

A banking system in which banks hold only a fraction of their outstanding deposits in cash or on deposit with the central bank.



Related Terms:

ABM (automated banking machine)

A bank machine, sometimes referred to as an automated teller machine (ATM).


concentration banking

System whereby customers make payments to a regional collection center which transfers funds to
a principal bank.


Cookie Jar Reserves

An overly aggressive accrual of operating expenses and the creation of
liability accounts done in an effort to reduce future-year operating expenses.


Excess reserves

Any excess of actual reserves above required reserves.


Excess Reserves

reserves of commercial banks in excess of those they are legally required to hold.



Federal Reserve Banks

The twelve district banks in the Federal reserve System.


Federal Reserve Board

Board of Governors of the Federal reserve System.


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Federal Reserve System

The central bank of the U.S., established in 1913, and governed by the Federal
reserve Board located in Washington, D.C. The system includes 12 Federal reserve Banks and is authorized
to regulate monetary policy in the U.S. as well as to supervise Federal reserve member banks, bank holding
companies, international operations of U.S.banks, and U.S.operations of foreign banks.


Federal Reserve System

The central banking authority responsible for monetary policy in the United States.


Federal Reserve (the Fed)

The central bank in the United States, responsible for setting interest rates.


Foreign banking market

That portion of domestic bank loans supplied to foreigners for use abroad.


Foreign Exchange Reserves

A fund containing the central bank's holdings of foreign currency or claims thereon.


fractional interest discount

the combined discounts for lack of control and marketability. g the constant growth rate in cash flows or net income used in the ADF, Gordon model, or present value factor.


Free reserves

Excess reserves minus member bank borrowings at the Fed.


International Banking Facility (IBF)

International banking Facility. A branch that an American bank
establishes in the United States to do Eurocurrency business.


International Reserves

See foreign exchange reserves.


Fractional Reserve Banking Image 3

Legal Reserve Requirement

See reserve requirement.


Official reserves

Holdings of gold and foreign currencies by official monetary institutions.



Required reserves

The dollar amounts based on reserve ratios that banks are required to keep on deposit at a Federal reserve Bank.


Required Reserves

reserves that the central bank requires commercial banks to hold.


Reserve

An accounting entry that properly reflects the contingent liabilities.


Reserve currency

A foreign currency held by a central bank or monetary authority for the purposes of
exchange intervention and the settlement of inter-governmental claims.


Reserve Currency

A currency, frequently the U.S. dollar, that is used by other countries to denominate the assets they hold as international reserves.


Reserve Ratio

See reserve requirement.


Reserve Ratio

This calculation is used by states to determine the unemployment contribution rate to charge employers. The ongoing balance of a firm’s unclaimed
contributions from previous years is reduced by unemployment claims for the past year and then divided by the average annual payroll, resulting in a "reserve ratio".


Reserve ratios

Specified percentages of deposits, established by the Federal reserve Board, that banks must
keep in a non-interest-bearing account at one of the twelve Federal reserve Banks.


Reserve Requirement

Fraction of total deposits that a commercial bank is required by the central bank to hold in the form of reserves.


Reserve requirements

The percentage of different types of deposits that member banks are required to hold
on deposit at the Fed.



Reserved material

Material that has been reserved for a specific purpose.


Reserves

Commercial banks' reserves consist of their holdings of cash and their balances in deposits with the central bank. See also foreign exchange reserves, excess reserves, required reserves, reserve requirement.


Wholesale mortgage banking

The purchasing of loans originated by others, with the servicing rights
released to the buyer.



 

 

 

 

 

 

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