Journal Article

How closely do banks manage vault cash?

Abstract: This article examines daily vault cash balances in the Eighth Federal Reserve District to see if banks have been optimizing their vault cash levels. Recent reductions in reserve requirements have not been accompanied by significant reductions in vault cash. This situation suggests that banks may be managing vault cash reserves primarily as precautionary balances to satisfy daily fluctuations in deposits and withdrawals, rather then part of total reserve management. In 1997, some larger banks instituted formal management of vault currency. If this practice spreads, it will have implications for monetary policy and cash operations.

Keywords: Bank reserves; Cash management;

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Review

Publication Date: 1998

Issue: Jul

Pages: 43-54

Order Number: v. 80 no. 4