Minimum reserve requirements
Credit institutions in the euro area are obliged to hold a minimum amount of deposits, called minimum or required reserves, in accounts with their respective national central banks. An increase in the required reserve ratio absorbs some of the balances held by banks that would otherwise be available for lending to the rest of the economy. Thus, an increase in reserve requirements restrains monetary expansion and vice-versa. The reserve requirement for each institution is determined as a proportion of certain liability items on its balance sheet.