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How Concentrated Is the Distribution of Banks' Reserve Balances?

Author

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  • Russell Wong

Abstract

Reserve balances play a critical role in the banking system. Prior to 2020, they satisfied reserve requirements, and they now also serve as the primary payment instrument for settling transactions and client orders via the Fedwire system. Maintaining adequate reserve balances allows banks to meet withdrawal demands and instills depositor confidence, reducing the risk of bank runs. Empirical studies have demonstrated that banks' holding of reserve balances affects the provision of bank credit to firms and households, although the relationship depends on types of credit and methods of reserves being injected into the banking system.1

Suggested Citation

  • Russell Wong, 2025. "How Concentrated Is the Distribution of Banks' Reserve Balances?," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, vol. 25(18), May.
    • Handle: RePEc:fip:fedreb:99946
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