To calculate excess reserves, subtract a bank’s required reserves from its total reserves. Total reserves are the bank’s vault cash plus the balance it holds in its account at a Federal Reserve Bank. Required reserves are the bank’s reservable liabilities multiplied by the reserve requirement ratio set by the Federal Reserve Board. Since March 26, 2020, that ratio has been zero percent for every category of deposit, so in practice a bank’s entire reserve balance is excess.1Federal Register. Regulation D: Reserve Requirements of Depository Institutions The mechanics still matter for financial analysis, historical work, and any future rate change.
The Formula
Excess Reserves = Total Reserves − Required Reserves
A positive result is the amount the bank can lend or invest beyond its legal minimum. A result of zero means the bank is holding exactly what it needs. A negative result signals a deficiency the bank has to cover before the end of its maintenance period.
Step One: Find Total Reserves
Total reserves have two components: vault cash (the physical currency and coin stored at the bank’s branches) and the balance the bank keeps in its account at a Federal Reserve Bank.
Both figures appear on the bank’s balance sheet or on its quarterly Consolidated Report of Condition and Income, known as a Call Report.2FDIC. Consolidated Reports of Condition and Income Banks file these using either the FFIEC 031 form (institutions with foreign offices) or the FFIEC 041 form (domestic-only institutions). On Schedule RC:
- Line 1.a — Noninterest-bearing balances and currency and coin — captures vault cash.
- Line 1.b — Interest-bearing balances — captures balances held at Federal Reserve Banks, including reserve balances, excess balances, and term deposits.3FDIC. FFIEC 031 and 041 Line Item Instructions for Schedule RC
Add the two lines together. Pull both from the same reporting period; mixing quarters will throw off the result.
Step Two: Identify Reservable Liabilities
Required reserves apply only to certain deposit types. Under the Federal Reserve’s Regulation D (12 CFR Part 204), reservable liabilities fall into three categories:4eCFR. 12 CFR Part 204 – Reserve Requirements of Depository Institutions (Regulation D)
- Net transaction accounts. Deposits from which the account holder can make payments or transfers to third parties, primarily demand deposits (checking accounts) and negotiable order of withdrawal (NOW) accounts.
- Nonpersonal time deposits. Time deposits such as certificates of deposit held by entities rather than individuals, with fixed maturity dates.
- Eurocurrency liabilities. Net balances owed to a bank’s non-U.S. offices and certain international banking facility obligations.
Savings deposits are not reservable. In April 2020, the Federal Reserve eliminated the longstanding six-per-month limit on transfers from savings accounts, which had been the practical dividing line between savings and transaction accounts. Banks may still require seven days’ written notice before a savings withdrawal, but no transfer cap applies.
Add the three categories together to get total reservable liabilities. That figure is the base for step three.
Step Three: Apply the Reserve Requirement Ratio
Under 12 U.S.C. § 461, the Board of Governors sets the ratio for each category of reservable liability and may set it at zero.5Office of the Law Revision Counsel. 12 USC 461 – Reserve Requirements The statute authorizes up to 14 percent on transaction accounts above a threshold and up to 9 percent on nonpersonal time deposits.
Effective March 26, 2020, the Board set every ratio to zero, and the 2026 ratios under Table 1 of § 204.4 remain zero across the board:1Federal Register. Regulation D: Reserve Requirements of Depository Institutions
- Net transaction accounts, $0 to $39.2 million: 0 percent
- Net transaction accounts, $39.2 million to $674.1 million: 0 percent
- Net transaction accounts over $674.1 million: 0 percent
- Nonpersonal time deposits: 0 percent
- Eurocurrency liabilities: 0 percent
The Federal Reserve still indexes two thresholds annually as the statute requires: the reserve requirement exemption amount ($39.2 million for 2026) and the low reserve tranche ($674.1 million for 2026). While the ratios sit at zero, those thresholds have no practical effect on the calculation.
To compute required reserves, multiply each category of reservable liabilities by its ratio and add the results. At zero percent, required reserves are $0 no matter how large the deposit base.
Worked Examples
Current environment (zero-percent ratios). A bank holds $8 million in vault cash and $42 million in its Federal Reserve account. Total reserves are $50 million. Required reserves are $0. Excess reserves are $50 million.
Nonzero ratio scenario. Suppose the Board reinstates a 10 percent ratio on transaction accounts, and a bank has $15 million in total reserves against $100 million in net transaction accounts. Required reserves are $100 million × 0.10 = $10 million. Excess reserves are $15 million − $10 million = $5 million. That $5 million is what the bank could lend or invest beyond its legal obligation.
When the Result Is Negative
If required reserves exceed total reserves, the bank has a deficiency. It has to close the gap before its maintenance period ends, typically by borrowing overnight from another institution or through the Federal Reserve’s discount window. Federal Reserve Banks assess a deficiency charge at one percentage point above the primary credit rate in effect on the first day of the month when the shortfall occurred.6eCFR. 12 CFR 204.6 – Charges for Deficiencies In the current zero-percent environment, deficiencies are not a live concern, but the framework remains in place and would apply immediately if ratios rose.
Why the Calculation Still Matters at Zero Percent
Banks continue to hold trillions of dollars at the Federal Reserve even without a legal requirement, because the Fed pays interest on those balances. As of early 2026, the Interest on Reserve Balances (IORB) rate is 3.65 percent.7Federal Reserve Board. Interest on Reserve Balances Parking cash at the Fed is a risk-free way to earn a return, which is why voluntary balances stay large.
Tracking excess reserves also tells you something about a bank’s lending posture. A bank sitting on far more reserves than it needs for payment clearing and liquidity may be signaling caution or a shortage of attractive loan opportunities. A bank running close to its operational minimum is deploying more capital into loans and investments. And if the Board raises ratios in the future, the same three-step calculation, using the Call Report line items and the reservable liability categories above, is what you would run.