Are U.S. ReserveRequirements Still Binding?

The Federal Reserve requires U.S. commercial banks andother depository institutions to hold a minimum level ofreserves in proportion to certain liabilities. On occasion, thecentral bank has reduced reserve requirements—such as in1990, when requirements on large time deposits were dropped,and in 1992, when requirements on transaction accounts werereduced. In addition, more and more banks since 1994 haveused computer technologies that temporarily “sweep” depositsfrom one type of account to another, thereby reducing requiredreserve levels.