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LeoGlossary: Penalty-Free Band
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A penalty-free band is a range on both sides of the reserve balance requirement within which a financial institution needs to maintain its average balance over the maintenance period in order to satisfy its reserve balance requirement. The top of the penalty-free band is equal to the reserve balance requirement plus a dollar amount prescribed by the Board. The bottom of the penalty-free band is equal to the reserve balance requirement minus a dollar amount prescribed by the Board.
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