To calculate excess reserves, subtract a bank’s required reserves from its total reserves: total reserves are vault cash plus the balance the bank holds in its account at a Federal Reserve Bank, and required reserves are the bank’s reservable liabilities multiplied by the reserve requirement ratio set by the Federal Reserve Board. Since March 26, 2020, the Board has set all reserve requirement ratios to zero percent, so every dollar a bank currently holds in reserves counts as excess.1Federal Register. Regulation D: Reserve Requirements of Depository Institutions The formula still matters for historical work, monetary policy analysis, and any future change to the ratios.
The Formula
Excess Reserves = Total Reserves − Required Reserves
A positive result is the amount the bank can lend or invest beyond its legal obligation. A negative result is a deficiency the bank must cover before the end of its maintenance period. At the current zero-percent ratios, required reserves are $0 for every institution, so total reserves and excess reserves are the same figure.
Step 1: Find Total Reserves
Total reserves have two components: the physical currency and coin stored in the bank’s vaults and branches, and the balance the bank keeps in its account at a Federal Reserve Bank. Add them together.
Both figures appear on Schedule RC of the bank’s Consolidated Reports of Condition and Income, filed quarterly on FFIEC form 031 (for institutions with foreign offices) or FFIEC form 041 (for domestic-only institutions).2FDIC. Consolidated Reports of Condition and Income Two line items give you what you need:
- Line 1.a, noninterest-bearing balances and currency and coin, captures vault cash.
- Line 1.b, interest-bearing balances, includes balances held at Federal Reserve Banks, whether for reserve purposes, as excess balances, or as term deposits.3FDIC. FFIEC 031 and 041 Line Item Instructions for Schedule RC
Pull both numbers from the same reporting period. Mixing quarters will throw the calculation off.
Step 2: Identify Reservable Liabilities
Required reserves are only assessed on certain kinds of deposits. Federal Reserve Regulation D (12 CFR Part 204) names three categories of reservable liabilities:4eCFR. 12 CFR Part 204 – Reserve Requirements of Depository Institutions (Regulation D)
- Net transaction accounts, primarily demand deposits (checking accounts) and negotiable order of withdrawal (NOW) accounts.
- Nonpersonal time deposits, meaning time deposits such as certificates of deposit held by entities rather than individuals.
- Eurocurrency liabilities, meaning net balances owed to a bank’s non-U.S. offices and certain international banking facility obligations.
Savings deposits are not reservable liabilities. In April 2020, the Federal Reserve eliminated the longstanding six-transfer-per-month cap on savings accounts, so the practical distinction between savings and transaction accounts disappeared for reserve purposes. Banks may still require seven days’ written notice before a savings withdrawal.
Add the three reservable categories together. That sum is the base for the required reserves calculation.
Step 3: Apply the Reserve Requirement Ratio
Under 12 U.S.C. § 461, the Board of Governors sets a ratio for each category of reservable liability, and the statute permits ratios up to 14 percent on transaction accounts above a threshold, up to 9 percent on nonpersonal time deposits, and as low as zero.5Office of the Law Revision Counsel. 12 USC 461 – Reserve Requirements
Effective March 26, 2020, the Board set every ratio in Table 1 of § 204.4 to zero percent, and the ratios remain at zero for 2026:1Federal 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 statute still requires annual indexing of the reserve requirement exemption amount ($39.2 million for 2026) and the low reserve tranche ($674.1 million for 2026), but neither threshold has any practical effect while the ratios themselves are zero.
Multiply each category of reservable liabilities by its ratio and add the products together. That total is required reserves. At zero percent across the board, the answer is always $0.
Step 4: Subtract and Interpret the Result
Suppose 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.
The math becomes more interesting when a ratio is nonzero, which is the case worth walking through for historical analysis or in case the Board raises ratios later. Take a bank with $15 million in total reserves and $100 million in net transaction accounts. At a hypothetical 10 percent ratio, required reserves would be $100 million × 0.10 = $10 million. Excess reserves would be $15 million − $10 million = $5 million. That $5 million is what the bank could lend or invest beyond its legal minimum.
If the subtraction produces a negative number, the bank has a deficiency. It would need to borrow, either through the Federal Reserve’s discount window or from other institutions, to close the gap before its maintenance period ends. At the current zero-percent ratios, deficiencies are not a practical concern, but the framework and its penalties remain in force if ratios ever rise.
Why the Number Still Matters at Zero Percent
If required reserves are $0, it’s fair to ask why banks keep trillions of dollars parked at the Federal Reserve. The answer is the Interest on Reserve Balances (IORB) rate. The Fed pays interest on every dollar a bank holds in its reserve account, and as of early 2026 that rate is 3.65 percent.6Federal Reserve Board. Interest on Reserve Balances Reserves at the Fed are a risk-free return, so banks maintain large balances by choice.
The Federal Reserve uses that dynamic under its ample-reserves framework, keeping enough reserves in the system that short-term interest rates settle within the target range (3.5 to 3.75 percent as of early 2026) without daily open market operations.7Federal Reserve Board. Federal Reserve Issues FOMC Statement The IORB rate acts as a floor: banks have little reason to lend overnight below what the Fed already pays them.8Federal Reserve Board. Implementing Monetary Policy in an Ample-Reserves Regime
For analysts, comparing a bank’s total reserves to what it would actually need for daily payments and liquidity still says something useful. A bank sitting on far more than it needs is signaling caution or a shortage of attractive lending opportunities. A bank running close to its operational minimum is putting more capital into loans and investments. The formula is the same whether the required-reserves term is zero or not; only the interpretation shifts.