Si El Banco Central Disminuye El Coeficiente Legal De Caja

If central banks in different countries control the bank reserve ratio and fluctuations occur, the main consequence is a change in supply-side monetary policy. Indeed, the price of the offer causes changes in its multiplier. The cash ratio (c) is equal to the percentage between the assets of the banking system or reserve (CNC) and the deposits remitted by savers to the bank (D). The level of minimum reserves to be held by each institution is calculated by multiplying the legal liquidity ratio (2 % in the case of EMU) by the statutory liability items. In Turkey, it is 8.5%, similar to Israel, but which reaches 9%. Bulgaria has set it at 10%. These are countries that already have a significantly higher reserve ratio. The same can be observed in the following countries. A second important function of the reserve requirement system is to widen the structural liquidity deficit of the banking system. The mandatory holding of reserves with national central banks contributes to increasing the demand for central bank funding by credit institutions. The ECB can thus control the money market interest rate through the loans it grants to credit institutions.

This allows the bank to deposit or withdraw money from the market, with the cash ratio inversely proportional to the money multiplier. In other words, if the central bank, as a monetary policy measure, decided at some point to increase the statutory cash ratio, the amount of money that could be created would be smaller (see How Banks Create Money) because banks would keep a higher percentage of the deposits they receive. There are two different ways to manipulate banks` reserve requirement ratios. First of all, it should be borne in mind that the central banks of different countries will have to hold more money in their reserves if this ratio increases. The direct consequence is that there is less money circulating in the country. This is a so-called restrictive monetary policy. An increase in the interest rate of the economy tends to reduce the ratio of total reserves to deposits by increasing the opportunity cost of holding excess reserves. An increase in the reference rate or the interbank rate tends to increase the reserve-to-deposit ratio by making loans more expensive if they do not have sufficient reserves. Finally, a decline in the cash ratio, as expected for January next year, will lead to a downward movement in the RL.

Commercial banks have control of their own reserves and/or surplus assets, which can be converted into excess reserves. These are the reserves that the bank can use immediately to satisfy the needs of its customers in case of unexpected withdrawals of large deposits in case of emergency. To determine how much they want to hold as excess reserves, banks conduct a cost-benefit analysis. On the one hand, maintaining reserves has an opportunity cost due to the interest rate that is no longer collected. On the other hand, if excess reserves are kept very low and an unexpected withdrawal of funds occurs, a bank may be forced to borrow money to meet its cash needs. There are two main sources of these loans: the loan granted by the central bank at the intervention rate, which is now 1% at the ECB, and short-term loans from other banks, whose cost in the euro area is the interbank rate called Euribor, which is now 2%. It should be remembered that the cash ratio is the percentage of deposits that banks must hold in the form of legal reserves. In general, in turn, it consists of the notes and coins that are in the banking system, that is, the banks and savings banks that have in their offices to meet the liquidity needs of their customers, as well as the deposits they hold at the central bank. The cash ratio (c) is one of the monetary policy parameters that central banks use to control the money supply in the market. Manipulation can be done in two ways: A practical example would be that if a bank has a legal reserve ratio of 1%, this means that if it has €100,000, it must have at least €100 as liquid reserve on a mandatory basis. This liquidity is usually located in the central banks of countries.

Now consider a simple balance sheet of a private commercial bank. The bank accepts deposits (D) and grants loans to the public. A fraction of deposits is held in reserve (RL) to meet the cash ratio Given that the legal reserve ratio is one of the basic parameters that a country has in its economy for central banks to exercise control over market finances, the different ratios of legal banks are monitored depending on the country. Reserves materialize in two forms, in the money that banks hold in their vaults (liquidity reserves), which represents additional value, and in those deposited with the central bank, which usually represent the largest part, because banks also hold a much smaller percentage of liquidity reserves. The function of the cash ratio is that the money multiplier is not excessively high. The aim is to ensure the short-term solvency of banks and to ensure that the funds they provide do not multiply uncontrollably. The President of the Central Bank of Venezuela (BCV), Calixto Ortega Sánchez, announced that from September 1, 2018, the legal reserve of commercial banks will be increased to 100% of deposits. This measure is reflected in Resolution No. 18-08-01 of the Central Bank of Venezuela (BCV). Second, if, on the other hand, the reserve requirement ratio is reduced, banks will have more liquidity and will therefore be able to lend more to individuals. According to the basic principles of monetary policy, one could infer that there will be more entrepreneurs borrowing to make investments. For all this, we speak of expansionist policy or expansionist policy.

In financial markets, the increase in the ratio of cash to banks will result in less money in circulation, and therefore people will have less access to credit and investment. A bank cannot invest all the deposits that savers give it, as this could lead to liquidity shortfalls or institutional failures. In order to avoid these situations (among others), regulations issued by the central bank require banks to hold a percentage of the deposits in their possession. This means that a coefficient of 1% (common in the eurozone today) means that for every €100 we deposit in savings with a company, it holds €1 of legal reserve (CNEC) and has the capacity to invest or grant loans worth €99. The impact of the cash ratio results from the rules of each country`s central bank, which determines the reserve requirements that banks must hold in proportion to their deposits. The European Central Bank (ECB) announced yesterday that it would reduce the cash ratio from the current 2% to 1% from 18th January 2012. The total amount of reserves held by a bank consists of two components. There is a minimum amount of reserves that the institution is legally required to hold: statutory reserves (RLs). In addition, the bank could hold additional funds called excess reserves (UAs). The monetary multiplier is determined by the total amount of reserves. Therefore, the ratio of reserves to deposits is determined both by the behaviour of the banking system and by the legal reserves required set by the central bank. Banks do not keep the money deposited there, because it is less profitable to keep the funds silent in their facilities, so each bank takes a large part of the deposited money and tries to invest it either through loans or through securities (stock exchange) or debts (bonds).

This percentage varies by country or currency. Let`s look at the cash ratio of several countries in the world: in Peru the coefficient is 14.7%, while in Venezuela it reaches a rate of 17%. In Brazil, banking authorities have set 20%, and in Asian countries, China has at least 19.5% for many of their rural banks, and Hong Kong 18%.