Solution Summary: The author explains that excess reserves are the capital reserves held by a bank or financial institution in excess of what is required by regulators, creditors or internal controls.
Definition Definition Capital reserves held by banks or financial institutions over and above the reserves that are required to be maintained by the regulator toward its liabilities and for internal controls. For commercial banks, excess reserve is the amount over the standard reserve as decided by the central bank. These excess reserve funds are available in the form of cash and cash equivalents.
