what are interbank deposits 
the term interbank deposit refers to an arrangement between two banks in which one bank holds funds in an account for the other the interbank deposit arrangement requires that the holding bank open a due to account for the other this is a general ledger account with funds payable to another party in the arrangement the correspondent bank is the one that waits for the deposit understanding interbank depositsinterbank deposits are part of the interbank market the interbank market is a system used by banks and other financial institutions to trade currencies this system excludes retail investors individuals who buy and sell securities for their personal account instead of for another company or organization and other smaller trading parties most interbank trading conducted on the market is proprietary meaning banks do so between and for each other there are instances though where this type of banking takes place for large institutional customers in the interbank market banks borrow from and lend money to each other in order to manage liquidity and meet the reserve requirements that regulators place on them a reserve requirement is the amount of money a bank must keep in its vaults deposits as well as loans are among the many types of transactions that take place between banks that help them meet these conditions these transactions also provide the market with a great deal of liquidity 