The reserves of commercial banks must be held against
A. the bank as equity.
B. losses.
C. savings deposits.
D. commercial loans.
This one was confusing because it says held against. I would think it would need to be held against C. savings deposits.
The reserves of commercial banks do not necessarily need to be "held against" anything. Instead, they are held for various purposes, such as meeting withdrawals by depositors, ensuring stability within the banking system, and complying with regulatory requirements.
In this context, reserves typically refer to the reserve balances that commercial banks hold at their respective central banks. These reserves serve as a form of "insurance" for the banks and help them maintain liquidity.
Therefore, the correct answer to your question is not C. savings deposits. While reserves might be used to fulfill deposit withdrawals, they are not specifically held against savings deposits.
Choosing among the provided options, the most suitable answer would be B. losses. Commercial banks hold reserves to cushion potential losses that they might incur due to defaults on loans, decreases in the value of assets, or any other negative financial events.
To summarize, while reserves are an important aspect of a commercial bank's operations, they are not held specifically against savings deposits. Instead, reserves are held to meet various purposes and provide support, including covering potential losses.