Excess reserves refer to the amount of money that banks keep in reserve beyond what is required by regulatory authorities. These excess reserves are typically held as deposits with the Federal Reserve and can be used by banks for making payments, lending or investing. The level of excess reserves can provide insight into the bank's liquidity position and its willingness to lend money. In general, higher levels of excess reserves indicate a more cautious approach to lending, while lower levels suggest that banks are more likely to make loans with their available funds.