Definition of Legal Reserve Requirement

Legal Reserve Requirement

See reserve requirement.

Assets requirements

A common element of a financial plan that describes projected capital spending and the
proposed uses of net working capital.

Excess reserves

Any excess of actual reserves above required reserves.

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.

Free reserves

Excess reserves minus member bank borrowings at the Fed.

Initial margin requirement

When buying securities on margin, the proportion of the total market value of
the securities that the investor must pay for in cash. The Security Exchange Act of 1934 gives the board of
governors of the Federal reserve the responsibility to set initial margin requirements, but individual
brokerage firms are free to set higher requirements. In futures contracts, initial margin requirements are set by
the exchange.

Legal capital

Value at which a company's shares are recorded in its books.

Legal bankruptcy

A legal proceeding for liquidating or reorganizing a business.

Legal defeasance

The deposit of cash and permitted securities, as specified in the bond indenture, into an
irrevocable trust sufficient to enable the issuer to discharge fully its obligations under the bond indenture.

Legal investments

Investments that a regulated entity is permitted to make under the rules and regulations
that govern its investing.

Maintenance margin requirement

A sum, usually smaller than -but part of the original margin, which must
be maintained on deposit at all times. If a customer's equity in any futures position drops to, or under, the
maintenance margin level, the broker must issue a margin call for the amount at money required to restore the
customer's equity in the account to the original margin level. Related: margin, margin call.

Margin requirement (Options)

The amount of cash an uncovered (naked) option writer is required to
deposit and maintain to cover his daily position valuation and reasonably foreseeable intra-day price changes.

Materials requirement planning

Computer-based systems that plan backward from the production schedule
to make purchases in order to manage inventory levels.

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.

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 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 requirements

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

Sinking fund requirement

A condition included in some corporate bond indentures that requires the issuer to
retire a specified portion of debt each year. Any principal due at maturity is called the balloon maturity.

materials requirements planning (MRP)

a computerbased information system that simulates the ordering and
scheduling of demand-dependent inventories; a simulation
of the parts fabrication and subassembly activities that are
required, in an appropriate time sequence, to meet a production
master schedule

Material requirements planning (MRP)

A computer-driven production methodology
that manufactures products based on an initial demand forecast. It tends to result in
more inventory of all types than a just-in-time (JIT) production system.

Federal Reserve (the Fed)

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

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.

Federal Reserve System

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

Foreign Exchange Reserves

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

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.

International Reserves

See foreign exchange reserves.

Required Reserves

reserves that the central bank requires commercial banks to hold.

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 Requirement

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

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.

Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA)

A federal Act shielding employers from liability if they have made
a good-faith effort to verify a new employee’s identity and employment eligibility.

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".

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.

Material requirements planning

A computerized system used to calculate material
requirements for a manufacturing operation.

Requirements explosion

The component-level requirements for a production run,
derived by multiplying the number of parent-level requirements by the component
requirements for each parent, as specified in the bill of materials.

Reserved material

Material that has been reserved for a specific purpose.

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