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An US bank is currently holding total transaction deposit of $200 million and non-transaction deposit of...

An US bank is currently holding total transaction deposit of $200 million and non-transaction deposit of $100 million. How much would be the total legal reserve requirement of that bank based on the most recent reserve requirement ratio imposed by FED at the beginning of the year 2020?

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Answer #1

The reserve ratio is the portion of reservable liabilities that commercial banks must hold onto, rather than lend out or invest. This is a requirement determined by the Federal Reserve. The minimum amount of reserves that a bank must hold on to is referred to as the reserve requirement.

On March 15, 2020, the Fed announced it had reduced the reserve requirement ratio to zero effective March 26, 2020. It did so to encourage banks to lend out all of their funds during the COVID-19 coronavirus pandemic.

hence, total reserve requirement= total deposits*0%= 0

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