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> Fractional reserve is exactly that banks lend out a fraction of the money that they take in Isn't it a multiple instead of a fraction? Banks are required to
by spdionis 8y ago
> Fractional reserve is exactly that banks lend out a fraction of the money that they take in
Isn't it a multiple instead of a fraction? Banks are required to keep in reserve a small percentage of the actual amount being lent, which means that they can lend a multiple of the money they take in.
- zrail 8y agoCorrect. In the US the required capital reserve is expressed in terms of daily net transaction amount. Wikipedia has a good breakdown[1], but for large banks the Fed requires 10% of NTA to be swept into the bank's Fed account overnight. There are also capitalization requirements for all banks, which are more stringent for nationally important "too big to fail" banks and bank-like entities.