Clearing balance requirement
Encyclopedia
Financial institutions use clearing balance requirement (or settlement balances requirement) to describe the amount of money or balance which they anticipate will be required to perform their clearing
services.
Section VIII of the Reserve Maintenance Manual states:
Clearing (finance)
In banking and finance, clearing denotes all activities from the time a commitment is made for a transaction until it is settled. Clearing is necessary because the speed of trades is much faster than the cycle time for completing the underlying transaction....
services.
Section VIII of the Reserve Maintenance Manual states:
- "....A depository institution with a reserve balance requirement that has an account at a Reserve Bank may wish to hold balances above its requirement to facilitate its clearing needs. In all of these cases, the Federal Reserve encourages the depository institution to establish a clearing balance requirement."