legal reserves

Meanings

1. 1nounpluralfinancelegal

   Money that a bank or company is required by law to keep aside and not lend or spend.

   Grammar: Used as a plural noun; it takes a plural verb: legal reserves are held.

   Patterns

   • hold legal reserves
   • build up legal reserves
   • legal reserves of a bank
   • keep something as legal reserves

   The central bank raised the level of legal reserves that commercial banks must hold.

   After the crisis, lenders were told to keep larger legal reserves against bad loans.

   The company dipped into its legal reserves to cover the fine.

2. 2nounpluralfinancelegalspecialist

   In insurance, the amount an insurer must by law set aside to pay claims it expects to receive.

   Grammar: Plural noun used with a plural verb; often followed by for plus the type of claim.

   Patterns

   • legal reserves for claims
   • set aside legal reserves
   • increase legal reserves

   Insurers must report the legal reserves they hold for outstanding claims.

   Regulators checked whether the legal reserves for storm damage were adequate.

3. 3nounpluralfinancespecialist

   In some countries, the minimum share of customers' deposits that a bank must keep in cash or with the central bank.

   Grammar: Plural noun; often appears in phrases such as the legal reserve requirement, where the singular form is used before another noun.

   Patterns

   • legal reserve requirement
   • meet the legal reserves
   • lower legal reserves

   Cutting legal reserves lets banks lend more money to households.

   The rules on legal reserves differ from one country to another.

Common combinations

hold legal reserves

Banks must hold legal reserves equal to a share of their deposits.

build up legal reserves

The firm spent two years building up legal reserves before the expansion.

legal reserve requirement

The legal reserve requirement was eased to encourage lending.

set aside legal reserves

Insurers set aside legal reserves for claims that may arise later.

dip into legal reserves

The airline dipped into its legal reserves to keep flying through the downturn.

Synonyms and how they differ

statutory reserves

Very close in meaning, but it stresses that the amount is fixed by a written law or rule rather than by a regulator's decision.

required reserves

Common in central-banking contexts and focuses on the fact that the money is demanded by the authorities, not on its legal basis.

capital reserves

Not the same: this is money kept for general financial strength, not an amount the law forces a firm to hold.

Word family

reserve noun

An amount of money or a supply kept for future use.

reserves noun

The plural form used alone for money or supplies set aside.

reserve verb

To keep or set something aside for a later purpose.

reserved adjective

Kept for a particular person or purpose, as in reserved funds.

Commonly confused: legal reserves or reservations? legal reserves or resources?

Practice

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