Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What is the maximum reserve requirement for institutions on the first $2 million?

1. 1%

2. 0%

3. 3%

4. 10%

The correct answer is: 0%

The maximum reserve requirement for institutions on the first $2 million is zero percent. This means that financial institutions are not required to hold any reserves against the first $2 million of their transaction accounts. This policy is part of the regulatory framework designed by the Federal Reserve to encourage lending and the allocation of funds for productive use, particularly for smaller banks and local institutions. By not requiring reserves on the first $2 million, these institutions can provide more liquidity and support local economies without the burden of holding back funds. This context can arise because financial requirements may change based on the size of the institution and the overall economic strategy imposed by regulators. While other percentages indicate various levels of reserve requirements, in this case, having a zero percent requirement on the first $2 million specifically aims to leverage economic growth through increased lending capabilities.