A bank always prefers to lend out all the deposits made by their clients to other customers in order to be able to earn interest on such loans. They are required, by regulators, to maintain a certain amount of reserve ratio in case clients choose to withdraw money. Excess reserves are the reserves they are required to hold, over and above this mandated reserve ratio, to act as a buffer in case of situations such as a bank run. However, having to hold these excess reserves reduces their capacity to earn interest as it reduces the amount of funds they can loan out to customers.
help asap Why wouldn't a bank want to keep excess reserves as part of their asset portfolio?
why wouldn‘t a bank want to keep excess reserves as part of their asset portfolio?
Short Answer: Keep it concise. What are excess reserves and why might a bank want to keep them as part of their assets? Why wouldn't a bank want to keep excess reserves as part of their asset portfolio? What is a "bank run" and how does it cause bank failure? What does it mean that the Federal Reserve is the "Lender of Last Resort" and why is this role important in a bank panic?
help Short Answer: Keep it concise. What are excess reserves and why might a bank want to keep them as part of their assets?
what are excess reserves and why might a bank want to keep them as part of their assets?
excess reserves are equal to Excess reserves are equal to: S a . total reserves minus required reserves. b. required reserves minus loans. c. total reserves minus loans. d. total reserves plus required reserves. e. total reserves multiplied by required reserves. When do we say that a bank is loaned up? a. When its debtors don't want to repay b. When it is susceptible to a bank panic c. When its excess reserves equal zero d. When its required reserves...
Consider the following Bank balance sheet (assume Reserve Requirement Ratio is zero) Liabilities Assets Excess Reserves +10M Deposits +100M Government Bonds £20M Loans Ł80M Bank Capital +10M a. Suppose interest rate on loans and government bonds is 10%, interest rate on deposits is 8%, and interest rate on excess reserves is 0%. What is the Bank's net return on assets? Compute the return on equity. b. Suppose the risk weights imposed by the bank regulator on loans, securities, and reserves...
Let’s say that for some reason Bank Excess Reserves suddenly increase sharply. What effect would this change tend to have on interest rates for federal funds? Why?
Question 1 (1 point) The amount of reserves that a commercial bank is required to hold is equal to: Question 1 options: the amount of its checkable deposits. the sum of its checkable deposits and time deposits. its checkable deposits multiplied by the reserve requirement. its checkable deposits divided by its total assets. Save Question 2 (1 point) Answer the question on the basis of the following information for the Moolah Bank. Refer to the information and assume that Moolah...
Explain why a single commercial bank can safely lend only an amount equal to its excess reserves but the commercial banking system can lend by a multiple of its excess reserves. What is the monetary multiplier, and how does it relate to the reserve ratio? Give details and answer the questions fully.
5. Suppose the FED buys $1 million bonds from a bank. Assume that the public does not want to hold any additional currency. a. what is the total increase in deposits in the economy if all banks keep 2% excess reserves (i.e. in addition to the 10% required by law)? (10 points) b. Describe the two first steps of the deposit creation process within the banking system. (10 points) 5. Suppose the FED buys $1 million bonds from a bank....