Too-Little Reserves

If a bank actually has less reserves on-hand than required, then it has failed. It is now insolvent. The Fed will close the bank and try to sell it to a healthier, more solvent bank. If the bank cannot be sold, it is liquidated. What reserves are left are used to pay depositors and close accounts.

If a bank actually has less reserves on-hand than required, then it has failed. It is now insolvent. The Fed will close the bank and try to sell it to a healthier, more solvent bank. If the bank cannot be sold, it is liquidated. What reserves are left are used to pay depositors and close accounts.