Working Reserves

Working reserves, or excess reserves, is cash held by banks that exceed the required minimum reserve ratio mandated by law, and which acts as a buffer against unexpectedly large net withdrawals.

Working reserves take the form of vault currency, deposits at other banks, cash being collected and excess reserves held as deposits at the Federal Reserve bank.

Banks try to maintain an optimum level of working reserves, which balances interest income with having enough reserves to meet minimum reserve requirements. The cash reserve ratio is the minimum percentage of a bank's total monetary holdings that must be kept on hand in the form of actual currency.