Ample Reserves, Hollow Buffers: Reserve Distribution and Policy Incidence in U.S. Banking

Abstract

Ample aggregate reserves can coexist with thin bank-level buffers. Using quarterly US Call Report data from 2001 to 2024, this paper measures reserve-eligible balances relative to the historical Regulation D transaction-account base for retail-franchise banks. In 2024:Q4, 39.2 percent of banks and 10.4 percent of deposits lie below the historical ten percent top-tranche benchmark. Thin buffers are widespread, persistent for a subset, and concentrated among mid-sized, transaction-account-intensive banks. A reserve-policy change is costly only when reserve remuneration falls below a close market alternative and the bank’s buffer is insufficient. Aggregate abundance is not a sufficient statistic for reserve-policy incidence.

Citation

Pusateri, Nicholas R. 2026. “Ample Reserves, Hollow Buffers: Reserve Distribution and Policy Incidence in U.S. Banking.” Working Paper. URL: https://nicpusateri.com/hollow

@article{pusateri2026hollow,
  title={Ample Reserves, Hollow Buffers: Reserve Distribution and Policy Incidence in U.S. Banking},
  author={Pusateri, Nicholas R.},
  journal={Working Paper},
  year={2026},
  url={https://nicpusateri.com/hollow},
  }