Did Zero Reserve Requirements Boost Lending? Evidence from the 2020 Fed Reform

Abstract

In March 2020, the Federal Reserve reduced reserve requirements for transaction deposits from 10% to 0%, explicitly aiming to free up bank balance sheets for lending. Using Call Report data, I examine how banks responded to this regulatory change. Before the reform, all banks held at least 10% reserves, and roughly half of deposits were at banks with reserve ratios exceeding 40%. Afterward, the distribution shifted sharply, with one-third of deposits at banks holding less than 10% reserves. The project asks whether this regulatory change translated into more lending or mainly shifted balance-sheet allocation toward other liquid assets.

Citation

Pusateri, Nicholas R. 2025. “Did Zero Reserve Requirements Boost Lending? Evidence from the 2020 Fed Reform.” Work in Progress. URL: https://nicpusateri.com/zero

@article{pusateri2025zero,
  title={Did Zero Reserve Requirements Boost Lending? Evidence from the 2020 Fed Reform},
  author={Pusateri, Nicholas R.},
  journal={Work in Progress},
  year={2025},
  url={https://nicpusateri.com/zero},
  }