Question

What is the reserve requirement, and how do we find it?

Answer 1

Reserve requirements are Federal reserve rules which requires banks and financial institutions to keep a prescribed percentage of the deposits held by the bank or financial institution. This amount is required to be maintained with Federal Reserve Bank by every Bank/financial institution.

E.g. Bank ABC has $500 million in deposits and the 10%. So the amount equivalent to 10% of $500 million (i.e. $50 million) must be required to be kept in an account with Federal Reserve Bank and this amount is not available for lending or any other purpose.