What is referred to as the reserve requirement for banks?

The reserve requirement for banks refers to the minimum percentage of deposits that banks must hold in reserve and not lend out. This regulatory measure is established by a country's central bank and is a key component of monetary policy. By requiring banks to retain a certain percentage of deposits as reserves, the central bank can control the money supply and influence interest rates in the economy.

When banks are mandated to keep a portion of deposits in reserve, they cannot loan out that amount, which helps ensure that they have enough liquidity to meet withdrawal demands from customers. This requirement is crucial for maintaining the stability of the banking system, as it prevents banks from becoming over-leveraged and reduces the risk of bank runs.

The options regarding total loans, interest rates charged, and capital maintenance do not accurately describe the reserve requirement. They relate to other aspects of banking operations and regulatory frameworks but do not reflect the specific function and definition of the reserve requirement itself.