>In theory the bank is not allowed to fall below a certain reserve threshold because they would be too fragile towards bank-runs. This is not true in reality.

>In theory the bank is not allowed to fall below a certain reserve threshold because they would be too fragile towards bank-runs. This is not true in reality. The only reserve requirements on financial institutions are on household deposits, and it's peace-of-mind that if 10% of Joe Public depositors show up one day demanding their money the bank won't have to deny. Functionally there are zero reserve requirements on the vast major of financial institution assets. It's been a long time since the banks have been anywhere near reserve constrained. Many central banks don't even have reserve ratios (like mine in Canada). Sure this stuff is complicated, but you can literally look it up on Wikipedia. The econ 102 money-multiplier model of deposits is not how modern banking works. >It is an organized method by which the Fed facilitates regulation dodging for the financial sector. This is borderline conspiracy theorizing, and it's kind of sad that people blindly accept it.