What is the term for the minimum amount of money banks must hold in reserve?

The term for the minimum amount of money that banks must hold in reserve is known as the reserve requirement. This is a regulation set by central banks that determines the minimum reserves each bank must hold to ensure that it has enough cash available to meet withdrawal demands and other obligations. The reserve requirement is crucial for maintaining the stability of the banking system, as it protects banks from sudden withdrawals and helps manage the overall money supply in the economy.

In contrast to this correct term, other options like "reserve rate," "liquidity ratio," and "deposit mandate" do not accurately describe this specific regulatory framework. The "reserve rate" might suggest a percentage, but it does not capture the full regulatory aspect. The "liquidity ratio" usually refers to a bank’s ability to meet short-term obligations and is not limited to reserves. Similarly, "deposit mandate" does not denote the requirement to hold reserves but rather could imply rules about accepting deposits. Therefore, "reserve requirement" is precisely defined and widely recognized in banking terminology.