What Are Bank Reserves? Banks' $2.95 Trillion at the Fed

In the week to 30 September 2026, US banks kept an average of $2.95 trillion in their own accounts at the Federal Reserve. In August 2008, the same accounts held $9.8 billion.

These balances are bank reserves. Banks use them to pay each other. The Federal Reserve pays interest on them. Here is what reserves are, why they grew so large, what drains them and how to read the weekly figure.

A bank keeps an account at the Fed, much as a household keeps an account at a bank. The balance in that account is its reserves. Only banks and similar deposit-taking firms can hold them.

Reserves are how banks settle payments with each other. When you pay someone at another bank, your bank sends reserves to theirs. The money never leaves the Fed's books.

Reserves are different from your deposits. A deposit is money a bank owes you. Reserves are money the Fed owes the bank. Cash in a bank's vault is a separate item.

No. Until 2020, US banks had to hold reserves equal to a share of some customer deposits. That rule was called a reserve requirement. The Fed cut it to zero from 26 March 2020.

Banks still hold large balances, but they choose to. A 2019 New York Fed speech by Lorie Logan gave two reasons banks want more than before 2008. The 2008 crisis "increased focus on managing liquidity risk". Liquidity risk is the risk of running short of cash that can be used at once.

New rules for larger banks also rewarded holding safe assets that can be used at once. Reserves are one such asset. They also earn interest.

The Fed's balance sheet lists what it owns, called assets. It also lists what it owes, called liabilities. Reserves are a liability of the Fed.

The chart shows the Fed's total assets, bank reserves and the cash held in the Overnight Reverse Repo Facility (ON RRP). Money market funds lend cash to the Fed through the ON RRP overnight. Reserves rose from $9.8 billion in August 2008 to $4.28 trillion in December 2021.

The rise came from Quantitative Easing (QE). Under QE, the Fed bought bonds in large amounts and paid for them with new reserves. We cover the four rounds in What Is Quantitative Easing?.

Total assets kept rising until they peaked at $8.97 trillion in April 2022. Reserves had already started to fall. By the week to 1 June 2022, they were $3.32 trillion.

Two other items grew instead over those six months. The US government's cash account at the Fed, the Treasury General Account (TGA), rose by $0.67 trillion. The ON RRP rose by $0.53 trillion.

In June 2022, the Fed began Quantitative Tightening (QT). It let bonds mature without replacing them. From the start of QT to its end in December 2025, total assets fell by $2.38 trillion. Reserves fell by only $0.46 trillion.

The ON RRP took most of the fall instead. Its balance fell by $1.96 trillion over the same span.

That buffer is now almost empty. On 6 October 2026, the ON RRP held $0.4 billion. We explain it in What Is the Reverse Repo Facility?.

Every dollar of Fed assets is matched by something on the other side of its balance sheet. Reserves are only one of those items.

The chart shows the Fed's four largest liabilities in the week to 30 September 2026. Reserves were the largest, at $2.95 trillion. Currency in circulation, the banknotes in wallets and tills, came to $2.48 trillion. The TGA held $0.95 trillion.

Reverse repos made up $0.33 trillion. Almost all of it, $0.326 trillion, came from foreign official and international accounts. The Fed describes these as institutions that include foreign central banks.

That pool is separate from the ON RRP, which averaged $3.7 billion that week.

The Fed does not set the level of reserves directly. Reserves are what is left after the other items. When the TGA, currency or reverse repos grow, reserves shrink, unless the Fed adds assets.

In late September 2026, reserves equalled 44% of the Fed's total assets. In August 2008, they equalled 1%.

Since January 2019, the Fed has said it will keep "an ample supply of reserves". Ample is not a fixed number.

Roberto Perli runs the Fed's market operations at the New York Fed. In a March 2026 speech, he said ample "does not refer to a specific quantity".

The Fed Funds Rate is the rate banks charge each other for overnight loans. Reserves are ample when a small rise or fall in their supply barely moves that rate. In Perli's words, the rate is then "only modestly sensitive" to those changes.

The Fed steers interest rates by paying Interest on Reserve Balances (IORB). A bank has little reason to lend reserves for less than the Fed pays. We explain the tool in How the Fed Sets Rates.

IORB has been 3.90% since 17 September 2026. At that rate, $2.95 trillion of reserves would earn banks about $115 billion over a year.

On 4 July 2025, a new law raised the US debt limit by $5 trillion, according to the Congressional Research Service. The debt limit is the legal cap on how much the government can borrow. The Treasury then rebuilt its cash account.

The chart shows reserves and the TGA as weekly averages. In the week to 16 July 2025, the TGA held $0.30 trillion while reserves were $3.40 trillion.

By the week to 29 October, the TGA held $0.96 trillion. Reserves had fallen to $2.85 trillion.

The TGA rose by $0.66 trillion. Reserves fell by $0.55 trillion. The ON RRP gave up $0.18 trillion over the same weeks, which softened the fall.

The Fed ended QT on 1 December 2025. From December 2025, it bought Treasury bills, US government debt that matures within a year, to keep reserves ample. In March 2026, Perli put the pace at $40 billion a month.

The New York Fed then cut the pace to $25 billion a month in mid-April 2026 and to $10 billion in mid-May. In September, Perli said the purchases had been at zero since mid-August.

In 2026 so far, reserves have stayed between $2.89 trillion and $3.14 trillion.

In September 2019, reserves fell to $1.39 trillion, their lowest since March 2011. On 17 September, the rate on overnight loans backed by Treasury bonds jumped to 5.25%. The Fed's target range for the Fed Funds Rate was 2% to 2.25%.

The Fed added cash to the market that day. We tell the story in What Is the Repo Market?.

The bill buying was meant to stop this happening again. Perli said that without it, April tax payments into the TGA would likely have "pushed reserves below the ample range".

A few points help:

Bank reserves are the money banks hold at the Fed, created when the Fed buys assets. They swelled with QE, then fell as the Treasury's cash account and other items grew. The Fed bought Treasury bills to keep them ample. By mid-August 2026, it had cut those purchases to zero.

This explainer is part of the YX Insights Academy. Each one takes a single idea and checks it against real data.

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No. A deposit is money a bank owes its customer. Reserves are money the Federal Reserve owes a bank, held in the bank's account at the Fed. Banks use reserves to settle payments with each other. Cash in a bank's vault is counted separately from both.

The reserve requirement for US banks is zero. The Federal Reserve cut it to zero from 26 March 2020. Before then, banks had to hold reserves equal to a share of some customer deposits. Banks still hold large reserves by choice, because reserves are safe, can be used at once and earn interest.

The Fed pays interest on reserves to steer short-term interest rates. A bank has little reason to lend overnight for less than it earns at the Fed. So the rate, called Interest on Reserve Balances, pulls market rates towards it. It has been 3.90% since 17 September 2026.

US banks held $2.95 trillion in reserves at the Federal Reserve in the week to 30 September 2026. That was down from a peak of $4.28 trillion in December 2021. In August 2008, before the Fed began buying bonds in large amounts, reserves were $9.8 billion.

When bank reserves fall too low, overnight borrowing costs can jump. In September 2019, reserves fell to $1.39 trillion. On 17 September, the overnight rate on loans backed by Treasury bonds hit 5.25%, far above the Fed's target range of 2% to 2.25%. The Fed added cash that day.

DISCLAIMER: This article is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.