However, some banks may choose to hold their excess reserves in order to facilitate upcoming transactions or meet contractual clearing balance requirements.

In all of these cases, the Federal Reserve encourages the depository institution to establish a clearing balance requirement."

Such transactions, by affecting commercial bank clearing balances, alter the liquidity of these banks and hence their willingness to lend to, or withdraw funds from, the discount houses.

Financial institutions use the clearing balance requirement (or settlement balances requirement) to describe the amount of money or balance which they anticipate will be required to perform their clearing services.

The same applies to the addition of the words 'rules for clearing balances in connection with settlement' in Amendment No 10, since such a wording could detract from the clarity of our definition of a payment system.