what is the reserve ratio 
the reserve ratio is the portion of reservable liabilities that commercial banks must hold onto rather than lend out or invest this is a requirement determined by the country s central bank which in the united states is the federal reserve it is also known as the cash reserve ratio the minimum amount of reserves that a bank must hold on to is referred to as the reserve requirement and is sometimes used synonymously with the reserve ratio the reserve ratio is specified by the federal reserve board s regulation d regulation d created a set of uniform reserve requirements for all depository institutions with transaction accounts and requires banks to provide regular reports to the federal reserve investopedia crea taylorthe formula for the reserve ratio reserve requirement deposits reserve ratio begin aligned text reserve requirement text deposits times text reserve ratio end aligned reserve requirement deposits reserve ratio as a simplistic example assume the federal reserve determined the reserve ratio to be 11 this means if a bank has deposits of 1 billion it is required to have 110 million on reserve 1 billion x 11 110 million during the pandemic of 2020 the federal reserve reduced the reserve requirements to 0 1