> My bank can loan out 10x its reserves. It only can find enough good risks to loan out 0.5x. Your bank can loan out as much as it wants as long as it's happy

> My bank can loan out 10x its reserves. It only can find enough good risks to loan out 0.5x. Your bank can loan out as much as it wants as long as it's happy with the risk, regardless of its current holding. This is because the loans come first, and any reserve requirements are then taken care of after the fact. So if there's a good loan opportunity it is issued, and then the bank goes looking for available reserves. And this assumes reserve requirements even exist, which they have not in several countries for decades: * https://en.wikipedia.org/wiki/Reserve_requirement#Canada https://en.wikipedia.org/wiki/Reserve_requirement#Canada Reserve requirement are irrelevant to loan creation. Per the Fed itself: > Changes in reserves are unrelated to changes in lending, and open market operations do not have a direct impact on lending. We conclude that the textbook treatment of money in the transmission mechanism can be rejected. * https://www.federalreserve.gov/pubs/feds/2010/201041/201041pap.pdf https://www.federalreserve.gov/pubs/feds/2010/201041/201041p... See also the S&P paper "Repeat After Me: Banks Cannot And Do Not 'Lend Out' Reserves": * https://www.hks.harvard.edu/sites/default/files/centers/mrcbg/programs/senior.fellows/2019-20%20fellows/BanksCannotLendOutReservesAug2013_%20(002).pdf https://www.hks.harvard.edu/sites/default/files/centers/mrcb... The 'money multiplier' does not exist: * https://research.stlouisfed.org/publications/page1-econ/2021/09/17/teaching-the-linkage-between-banks-and-the-fed-r-i-p-money-multiplier https://research.stlouisfed.org/publications/page1-econ/2021...