Banking 9: More on Reserve Ratios (Bad sound)


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Banking 9: More on Reserve Ratios (Bad sound)


The video on reserve ratios provides further insight into the concept of leverage in banking. It delves into the impact that reserve ratios have on a bank’s ability to lend out money and generate profits.

Understanding Reserve Ratios

The video explains how reserve ratios dictate the amount of deposits that banks must hold in reserve. This requirement limits the amount of money that banks can lend out, as they must keep a certain percentage of their deposits on hand.

Effect on Lending and Profits

By imposing reserve ratios, regulators aim to ensure the stability of the banking system. However, these ratios also restrict a bank’s ability to leverage its deposits and maximize profits through lending.


In conclusion, reserve ratios play a crucial role in shaping the operations of banks and the overall financial system. Understanding the impact of these ratios is essential for grasping the dynamics of banking and finance.


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