required reserve ratio
- noun
- Specialized
:
coeficiente de reserva obligatoria
- Banks must maintain a required reserve ratio to comply with regulations and manage their lending practices.
Examples
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The central bank set a required reserve ratio of 10% for all commercial banks to ensure liquidity.
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But a simple textbook derivation of the money multiplier shows that if the reserve requirements for checkable deposits and private currency are equal and binding, the money multiplier is equal to the reciprocal of the required reserve ratio.
Academic text (1991) -
Understanding the required reserve ratio helps banks determine how much they can lend versus how much they need to keep on hand.
Synonyms
1
7.2
The percentage of a bank's deposits that must be kept so customers can withdraw money
The percentage of customer deposits a bank must keep and not lend
Surface Forms
Morphology
The meaning is directly compositional: 'required' (necessary) + 'reserve' (stored funds) + 'ratio' (numeric relation) clearly denotes the numeric proportion of reserves that must be held. While it's a technical banking term, a B1 learner who knows the constituent words can reasonably infer it refers to the minimum percentage of funds banks must keep, so the expression is transparent.
Etymology
The term required reserve ratio comes from the simple image of a bank keeping a fixed part of customer money in a safe: the reserve is the cash kept back, the ratio is the part or percentage, and required shows it is a rule. That's why the phrase means 'the minimum percentage of deposits a bank must hold and not lend'.