mandatory liquid assets

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Certain liquid assets, the structure and nature of which is defined by regulatory requirement, that a bank is required to maintain on its balance sheet. It may be implemented as an instrument of monetary control or as a protection against ‘runs’ on particular banks. The regulatory trend is away from this type of control, since it often gives a market advantage to short-term government debt, which is a major part of the specified assets.

Subjects: Financial Institutions and Services — Accounting.

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