I'm not sure what you mean by "modern bank" - when is the cut off date for you? I can assure you that banks can and do end up in a position where they are unab

I'm not sure what you mean by "modern bank" - when is the cut off date for you? I can assure you that banks can and do end up in a position where they are unable to provide loans. Admittedly the process isn't "if deposits <= 0" because banks don't just access funds from depositors. A retail bank will typically have a blend of funding sources where deposit accounts make up 30-40% of the liabilities on the balance sheets. The rest of the funds are raised on money markets and through inter-bank lending or bond issuance. A bank's balance sheet looks like: - Liabilities: deposit accounts, issued bonds, borrowings - Assets: loans, reserves, equity. I can assure you that "if reserves < X" will mean that a bank is unable to offer a loan to a customer - credit worthy or not. I experienced a banking crisis first hand in the country of my birth and this is exactly what happened. This is why banking crisis are damaging to the economy as a whole - even creditworthy customers and businesses are starved of funds.