The currency in circulation in a country is based on the need or demand for cash in the community. The monetary authority of each country (or currency zone) is responsible for ensuring there is enough money in circulation to meet the commercial needs of the economy, and releases additional notes and coins when there is a demand for them. Banks would routinely or exceptionally order cash from the monetary authority to meet anticipated demand, and keep it in reserve in the bank. The banking regulator would typically determine the banks’
reserve requirements, including the minimum proportion of a bank’s assets that banks must hold in cash. When banks no longer believe they need as much cash in reserve they would return the cash to the monetary authority. Subject to directives from the regulator, banks tend to keep their cash reserves as low as is prudently necessary, as banks do not earn interest on it, and incur a cost to keep it securely. (The amount taken out of reserve is available for lending, at interest.) The amount of money needed to be at call varies because of a number of factors. For example, in many countries there is a higher demand at Christmas time when
commercial activity is highest. Also, when workers were paid in cash, there was a higher demand for pay-day. There may also be sudden, unexpected surges in demand for cash by individuals during economic panics, which may result in a "
run on the bank" as individuals seek to withdraw money from bank accounts. Cash held by banks is counted as part of the currency in circulation. Cash that is in the hands of individuals and businesses in the community may be needed for routine or exceptional purchases or held in reserve. Nowadays, a large part of everyday
transactions is effected using
electronic funds transfers, without the use of cash. When a business makes a cash sale, it will keep the cash it receives until it pays it to someone else or deposits it into a bank account, keeping part of it in its "float", in order to give change to customers. A significant part of the cash in circulation is used by and held within the
black economy. ==Foreign currency reserves==