averaging provision

What is averaging provision?

averaging provision definition and meaning on Finance terms:
A provision allowing counterparties to fulfil their reserve requirements on the basis of their average reserve holdings over the maintenance period. The averaging provision contributes to the stabilisation of money market interest rates by giving institutions an incentive to smooth the effects of temporary liquidity fluctuations. The Eurosystem’s minimum reserve system allows for averaging. <


reference: https://www.ecb.europa.eu/home/glossary/html/index.en.html