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How much cash do banks keep in the vault?

Have you ever wondered how much cash sits in a bank vault? Even if you’re not planning a robbery, you may still be interested in how much liquidity is out there. (In other words, whether your bank is capable of providing you with all the cash for your deposits.) We can’t give details about your bank specifically, but we do have statistics for the banking system as a whole. The graph shows that banks hold about $75 billion in their vaults at any moment, which translates to about $230 for each U.S. resident. This doesn’t seem like a lot, as many people have more than that deposited in an account.

A principal function of banks, of course, is to provide loans; and they use your deposits for this purpose. Under normal times, only a fraction of deposits are claimed at any moment, so the remaining cash in the banks is plenty to cover the demand. Should that not be the case, the Federal Reserve can provide the required cash as a loan, as long as the bank is solvent.

Note that cash holdings are highest in January and February every year, peaking in mid-February. This in part has to do with reserve requirements, as vault cash qualifies as reserves and can fill in when other components are harder to come by. And there is also cash demand management with some precautionary buffers for unexpected withdrawals. All of these may have seasonal patterns.

Finally, it’s impossible not to see the mountain of cash early in 2000. It was also impossible at the time to avoid the discussion of the risks and concerns associated with Y2K, including worries about computer systems failing on January 1, 2000. Both banks and the public wanted to be assured there was enough cash on hand to complete whatever electronic transactions might be interrupted.

How this graph was created: Search for “vault cash,” select the weekly series, and click “Add to Graph.”

Suggested by Christian Zimmermann.

View on FRED, series used in this post: TLVAULTW

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