A U.S.bank can run up to a 5-percent deficit in its legal reserve requirement unconditionally without incurring an interest penalty from the Federal Reserve System.

Question

Quizplus · Accepted Answer

Banks must maintain a reserve requirement set by the Federal Reserve, and if they fall below this requirement, they must take corrective action, such as borrowing to meet the requirement, not run a deficit unconditionally. They may incur penalties or be required to borrow funds, often at a higher interest rate, to meet the shortfall.

A USBank Can Run Up to a 5-Percent Deficit in Its