Clearing balance requirements
What are the clearing balance requirements?
The clearing balance requirement is used by financial institutions to describe the amount of money thought to be needed to execute their clearing services. This is usually applied on the first day of a reserve maintenance period.
Where have you heard about clearing balance requirements?
When you deposit cash or cheques into your bank account, it may take a few days until you are able to access your newly deposited money. The clearing balance requirement covers the money that your bank keeps as a reserve in its system to complete the service as quickly and efficiently as possible.
What you need to know about clearing balance requirements.
Clearing is the common procedure where an organisation – for example a bank – takes on the temporary role of buyer and seller in order to efficiently reconcile orders between two parties. According to the Reserve Maintenance manual, a depository institution with a reserve balance requirement that has an account at a Reserve Bank may wish to hold balances above its requirement to facilitate its clearing needs. In all of these cases, the Federal Reserve encourages the depository institution to establish a clearing balance requirement.