A reason for holding all precautionary balances in a central pool is that the total pool, if centralized, can be reduced in size without any loss in the level of protection.

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Holding all precautionary balances in a central pool allows for efficient management of resources and distribution of risks. By pooling resources, the overall amount can be reduced without sacrificing protection levels. This allows for effective utilization of resources and cost savings.

A Reason for Holding All Precautionary Balances in a Central