Banks keep reserves at Federal Reserve Banks to meet their reserve requirements and to clear financial transactions, and transactions in the federal funds market enable depository institutions with reserve balances in excess of reserve requirements to sell reserves to institutions with reserve deficiencies.
Banks keep reserves at Federal Reserve Banks. This is to meet their reserve requirements and to clear financial transactions. Transactions in the federal funds market enable depository institutions with reserve balances in excess of reserve requirements. This is to sell reserves to institutions with reserve deficiencies.