All depository institutions "commercial banks, saving banks, savings and loan associations, and credit unions "must retain a percentage of certain types of deposits to be held as reserves. The Federal Reserve under the Depository Institutions Deregulation and Monetary Control Act of 1980 sets the reserve requirements. At the end of 1993, 4,148 member banks, 6,042 nonmember banks, 495 branches and agencies of foreign banks, 61 Edge Act and agreement corporations, and 3,238 thrift institutions were subject to reserve requirements. Since the early 1990s, reserve requirements have been applied only to transaction deposits (basically, interest-bearing and non-interest-bearing checking accounts). Required reserves are a fraction of such deposits; the Board of Governors within limits prescribed by law sets the fraction "the required reserve ratio ". Thus, total required reserves expand or contract with the level of transaction deposits and with the required reserve ratio set by the Board; in practice, however, the required reserve ratio has been adjusted only infrequently. Depository institutions hold required re-serves in one of two forms: vault cash (cash on hand at the bank) or, more important for monetary policy, required reserve balances in accounts with the Reserve Bank for their Federal Reserve District. Depositories use their accounts at Federal Reserve Banks not only to satisfy their reserve requirements but also to clear many financial transactions. Given the volume and unpredictability of trans-actions that clear through their accounts every day, depositories need to maintain a cushion of funds to protect themselves against debits that could leave their accounts overdrawn at the end of the day and subject to penalty. Depositories that find their required reserve balances insufficient to provide such protection may open supplemental accounts for required clearing balances.