The penalty for undershooting the minimum reserve requirements may include explicit interest rate charges as well as implicit costs in the form of more frequent monitoring and examinations.

Question

Quizplus · Accepted Answer

This statement is true. If a bank falls below the minimum reserve requirements, they may be charged explicit interest rates and may be subject to more frequent monitoring by regulators, which can result in implicit costs.

The Penalty for Undershooting the Minimum Reserve Requirements May Include