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10 July, 09:36

Why does a bank sometimes hold excess reserves?

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  1. 10 July, 09:40
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    The answer to the question above is "To maintain its liquidity if customers make demand whether its withdrawal or saving" based on the reserves meaning. A central bank holds the commercial banks excess of capital to maintain their liquidity. A bank will always have the liquidity risk to its business. This reserve is made to assure banks' liquidity.
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