# Reserves In extreme market conditions, some volatile assets may lead borrowing positions to become insolvent, with no collateral left. Any liabilities or borrowed assets will now be considered bad debt. This can have ripple effects on the platform. To protect each lending pool from bad-debt, Kinza Finance uses a reserves mechanism, whereby borrowers pay a portion of interest to a reserve pool that can be used as a last resort. To ensure that each pool has enough funds in reserves, Kinza determines a pool-specific Reserve Factor. ### Reserve Factor The Reserve Factor is a number given to each lending market that sets the proportion of interest diverted to reserves for that specific market. Given each market involves assets with varying levels of risk and volatility, it is necessary to divert more or less interest to reserves to ensure that reserve funds accumulate faster than bad-debt in each case. A careful balance must be reached to properly incentivize lenders, but also to maximize the security and stability of the lending market. Kinza Finance will allow the Reserve Factors to evolve according to Governance processes to achieve a healthy balance in each lending market. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.kinza.finance/lending-core/risk-methodology/reserves.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.