Editing Bank reserves (section)

==Cash held by banks==
{{see also|Currency in circulation}}
Banking regulators typically determine the banks' [[reserve requirement]]s, including the minimum proportion of a bank's assets that banks must hold in cash. Subject to such directives, banks tend to keep their cash reserves as low as is prudently necessary, as banks do not earn interest on it, and it is a cost to keep secure. In the United States such reserves are often called [[Bank vault|vault]] money.

The amount of money needed to be at call varies because of a number of factors. For example, there is a higher demand at Christmas time when [[commerce|commercial]] activity is highest. Also, when workers were paid in cash, there was a higher demand on payday. There may also be sudden, unexpected surges in demand for cash by individuals during economic panics, which may result in a "[[Bank run|run on the bank]]" as individuals seek to withdraw money from bank accounts.

When banks find that their cash holdings are below the anticipated cash requirements, especially if they are below the prescribed minimum, they would either borrow cash from other banks that have surplus holdings (e.g., via the interbank market) or from the monetary authority (e.g., via the "discount window"). When banks no longer believe they need as much cash on hand they would return the cash to the monetary authority,<ref name="ebr">{{cite book |title=Economics: Theory and Practice |last=Welch |first=Patrick J. |author2=Gerry F. Welch |year=2016 |publisher=John Wiley & Sons |isbn=978-1118949733 |page=190 |url=https://books.google.com/books?id=UGeVCwAAQBAJ |access-date=14 January 2017}}</ref> or offer the surplus to other banks.