all times be prepared to
meet these obligations.

The term employed to designate the funds provided for this purpose is
_reserves_, and in this country they consist of money kept on hand
and of credit balances in other banks. In other countries there is
also included under this head commercial bills of the kind which can
always be discounted. The term _secondary reserve_ is sometimes
employed in this country to designate certain securities, such as
high-class bonds listed on the stock exchanges, which can be sold
readily for cash in case of need.

The amount of reserve required can be determined only by experience.
In ordinary times it depends chiefly upon the habits of the community
in which the bank is located regarding the use of hand-to-hand money
as distinguished from checks and upon the character of its customers.
These habits differ widely in different nations, and considerably in
the different sections and classes of the same nation. In most
European and Oriental countries, for example, checks are little used
by the masses of the people, while in the United States and England
they are widely used. In these latter countries, however, they are
less widely used by people in the country than in the cities, and by
the laboring than the other classes in the cities. Within the same
city one bank may need to keep larger reserves than another on account
of the peculiarities of the lines of business carried on by its
customers and the classes of people with whom it deals.

In times of crisis and other periods of extraordinary demand, bank
reserves must be much larger than in ordinary times. Hoarding,
unusually large shipments of money to foreign countries and between
different sections of the same country, and payments of unusual
magnitude, increase the demands for cash made upon banks at such
times.

The manner in which clearing and other balances between banks are met
also has an influence on the amount of reserves required. If such
balances are paid daily and always in cash, the amount needed for this
purpose is much larger than if they are paid in checks on some one or
a few institutions and at longer intervals.

The note issue privileges of a bank also affect its reserve
requirements. Since, if not prohibited by law, notes may be issued in
all denominations needed for hand-to-hand circulation within a nation,
and since for all purposes except small change such notes are as
convenient as any other form of curre