The Board of Governors of the Federal Reserve System has finalized a rule that lowers reserve requirement ratios on transaction accounts at depository institutions to zero percent. This change, effective March 12, 2021, marks a shift toward an "ample reserves" regime and removes reserve requirements, aiming to support lending to households and businesses. The interim rule, first published in March 2020, received no public comments, leading to its adoption without changes. The rule is compliant with relevant legal frameworks, including the Administrative Procedure Act and the Paperwork Reduction Act.
Simple Explanation
The Federal Reserve decided that banks no longer need to keep a portion of their money in reserve, allowing them to use all of it to help people and businesses. This makes it easier for banks to give more loans, but some people think it might cause issues because it wasn’t explained very clearly.