Large Excess Reserves in the United States: A View from the Cross-Section of Banks

Abstract

Bank reserves in the United States increased dramatically at the end of 2008. Subsequent asset purchase programs in 2009 and 2011 more than doubled the quantity of reserves outstanding. We study the cross-sectional distribution of reserves in that period, and the relationship between holdings of reserves and other components of banks’ balance sheets. We find that reserves were widely distributed, increasing the liquidity position of many banks which, at the same time, were far from facing tight capital constraints. Our findings have implications for assessing the importance of large quantities of excess reserves for monetary policy.

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