BANK ASSETS Need for Cash Reserve.—A bank is the debtor of its deposi tors. Against its debts it must hold equivalent assets. Against de posits received for temporary investment, on which the bank pays interest, it must hold interest-bearing investments. Against de posits held by its customers for use as a means of payment it can also in part hold interest-bearing investments. But in its choice of assets to be held against these latter it is limited by the character of its obligations. It must be ready at all times (I) to pay out money on demand (2) to meet an adverse bal ance at the clearing. The bank must keep a part of its assets in actual money, or cash reserve. Idle cash earns no interest, and a bank run for profit will seek to keep down its cash reserve to the minimum required by safety. In ordinary circumstances it can rely on the demands of its depositors for money keeping within narrow limits. People determine the amount of money they keep in hand by considerations of convenience, and these considerations are not subject to arbitrary and discontinuous changes. People need more cash when they go on holidays or when they travel, and there are seasonal variations in the de mands on the banks for money for these purposes. But these are in general easily foreseen and provided for. Money is drawn out for innumerable small payments, and the amount in circulation at any moment is the aggregate of innumerable small balances. This aggregate exhibits the steadying effect of the law of averages. But the aggregate of balances of credit money, that is to say, of bank deposits, is on a different footing. The number of de positors is comparatively restricted, and it is likely that among them will be a small number of people carrying on business on a large scale, whose balances form a disproportionately large part of the total, and who hold large balances because they frequently make very large payments. The law of averages will not apply here. The bank must be prepared to settle through the clearing house widely fluctuating balances the extent of which cannot be foreseen. A clearing bank may rely for this purpose on reserves of cash. Or if the practice is to settle with cheques on a central bank, it may rely on balances deposited' with that bank. But, like cash reserves, balances deposited with the central bank yield no interest.