Yes an no. When there was no electronic means of transactions, what banks lent out was indeed mostly customers' deposit plus their own assets. Things became in

Yes an no. When there was no electronic means of transactions, what banks lent out was indeed mostly customers' deposit plus their own assets. Things became interesting when electronic transactions came into play. Banks virtually no longer have to payout any cash when they issue a loan to a client as they now only need to change two numbers: credit their asset account, and debit loan customer's cash account. So unless there were transactions paying out to another bank, there were no cash movements. So the minimum cash the bank should keep in their operation accounts is just the difference of the transactions paying out and those receiving in. But does that mean customers' deposits are not significant to the banks? Nope. Banks actually lend out much more than their customers' deposits. How much can they lend out is basicly the deposit amount divided by the reserve rate, e.g. 20%.