reserve

…within limits, the minimum cash reserves that banks must hold against their deposit liabilities. In some countries the reserve requirements against deposits provide for the inclusion of certain assets in addition to cash. Generally, the purpose of such inclusion is to encourage or require banks to invest in those assets…

…third tool regards changes in reserve requirements. Commercial banks by law hold a specific percentage of their deposits and required reserves with the Fed (or a central bank). These are held either in the form of non-interest-bearing reserves or as cash. This reserve requirement acts as a brake on the…

…potential volume of commercial bank reserves is enlarged. With more reserves, the commercial banks can make additional loans or investments, paying for them by entering credits to depositors’ accounts on their books. And in that way the money supply is increased. It may be reduced by reversing the sequence. The…

…the company (capital and legal reserves) and those amounts that are not restricted in this way (free reserves and undistributed profits).