The concept of Bank Reserves is a very simple one: it's the cash minimum that financial institutions must have on hand. But while the idea is basic, the implications are far-reaching. Central banks set the minimum requirements, and they are based on a country's economic needs.In theory, bank reserves help to ensure that banks can meet customer demand for cash withdrawals and other transactions. They also play an important role in monetary policy: by influencing how much money banks have to lend, central banks can impact interest rates and overall economic activity.There are different types of bank reserves, but most often they're either in the form of physical currency or deposits at the central bank itself. In some countries (like China), commercial banks are required to hold a large percentage of their assets as reserves; in others (like Canada), reserve requirements are much lower.Bank reserve ratios vary from country to country and even from time period to time period within countries.. The current global average reserve requirement is about 10 percent.. While this may seem like a lot, it's actually down significantly from levels seen before the 2008 financial crisis.. This reflects both increased lending by commercial banks and changes in regulatory frameworks around banking liquidity
