# Reserve Requirement

*Macro & Economy — Finicade finance glossary*

A reserve requirement is the fraction of deposits a bank must hold rather than lend. It was the classic textbook lever on money creation, and it is now largely obsolete: the US set it to zero in 2020, and most advanced-economy central banks steer policy through interest on reserves instead. It remains an active tool in China and several emerging markets, where it doubles as a capital-flow instrument.

**Also known as:** required reserves, cash reserve ratio

**Related terms:** [Money Supply](https://finicade.com/glossary/money-supply), [Bank Leverage](https://finicade.com/glossary/bank-leverage), [Central Bank](https://finicade.com/glossary/central-bank), [Bank Run](https://finicade.com/glossary/bank-run), [Basel Rules](https://finicade.com/glossary/basel-rules)

Source: https://finicade.com/glossary/reserve-requirement