Reserve Ratio
The portion (expressed as a percent) of depositors' balances banks must have on hand as cash. This is a requirement determined by the country's central bank, which in the U.S. is the Federal Reserve. The reserve ratio affects the money supply in a country. This is also referred to as the "cash reserve ratio" (CRR).
Investopedia Commentary
For example, if the reserve ratio in the U.S. is determined by the Fed to be 11%, this means all banks must have 11% of their depositers' money on reserve in the bank. So, if a bank has deposits of $1 billion, it is required to have $110 million on reserve.
Related Links
What Is Money?
What Are Central Banks?
Formulating Monetary Policy
See also: Bank of Canada - BOC, Central Bank, Federal Reserve Board - FRB, Federal Reserve System, Monetary Policy, Reserve Requirements
Also spelled: CRR