As the name suggest, this is the amount banks are required to hold in receive. Such requirements are set by the Federal Reserve System.

Reserve Requirements reflect one strategy the Federal Reserve uses to maintain the stability of the banking industry and money supply. By requiring banks to set aside some funds and not lend that portion out, they ensure all US banks have some cushion should depositors demand a higher normal level of deposits.

A central bank may also adjust reserve requirements to cool or help spur economic growth. By increasing this requirement, banks have less to lend out, reducing county-wide investment, reducing growth.