Question

Why do banks keep some money in reserve rather than loaning out all of their deposits? Check all that apply. to ensure they have money on hand to loan to wealthy corporations because they are required to by law because they have to meet the withdrawal requests made by customers to ensure that bank runs will take place to avoid loaning out funds whenever possible

Answer 1

B) because they are required to by law
C) because they have to meet the withdrawal requests made by customers

Answer 2

The correct answers are B) and C).

Banks keep some money in reserve because they are required to by law and because they have to meet the withdrawal requests made by customers.  

Banks keep a certain amount of money at hand to meet their daily operations. They required reserves above the amount of  cash that they keep. More accurately, they keep it as a vault cash and deposits at their regional Federal Reserve Bank.

The institutions that are required to hold reserves are commercial banks, credit unions, savings institutions, and foreign banking entities.