In the UK, I understand that there is no reserve requirement on any accounts, however most banks keep reserves with the Bank of England anyway because the Bank of England has began a policy of paying interest on reserves (where does the interest come from, does it, in turn, re-lend the money?)
But what about the US? There supposedly is a reserve requirement of up to 10% on "net transaction accounts", and there is no reserve requirement on any other type of account. Now, here's the apparent definition of a net transaction account:
Total transaction accounts consists of demand deposits, automatic transfer service (ATS) accounts, NOW accounts, share draft accounts, telephone or preauthorized transfer accounts, ineligible bankers acceptances, and obligations issued by affiliates maturing in seven days or less. Net transaction accounts are total transaction accounts less amounts due from other depository institutions and less cash items in the process of collection.
Can somebody please translate?
