Large bank reserves may not boost lending, could be contractionary instead.
Bank reserves reaching $1.5 trillion in 2011 may not lead to excessive lending by banks. A study found that the size of reserves doesn't affect bank lending when interest is paid on reserves and there are no reserve requirements. Frictions in balance-sheet costs could distort lending decisions, but large reserve balances do not necessarily result in too much bank credit and could even be contractionary.