Again, that's not how it works. You don't need the reserves at all (if you're a bank; if you're not a bank, then you have never in your life held reserves, and

Again, that's not how it works. You don't need the reserves at all (if you're a bank; if you're not a bank, then you have never in your life held reserves, and the way you may or may not be able to make loans is qualitatively different). When a bank makes a loan, they simply create a new deposit, say worth 100#. If the reserve ratio is 0.1, and assuming that bank had exactly the required reserves before this operation, then they will have to acquire 10# in additional reserves within a week or two (yes, you read that correctly; reserve requirements are after-the-fact requirement that can be fulfilled with some delay). More likely, though, the person or company that the loan was made to will use these 100# to pay somebody else, and in doing so, the newly created deposit is transfered to another bank B. To balance this transfer, bank A must transfer 100# in reserves to bank B. Usually, it will simply borrow those reserves from bank B against an appropriate collateral such as the loan it has made. The profit of bank A from the loan is the different in interest between the interest owed by their customer, and the interest they have to pay in the interbank market to bank B. At the same time, bank B now has an increased reserve requirement, and they need to get those 10# from somewhere. As I explained previously, this will lead to the interbank rate being bid up if there are no excess reserves in the system. When that happens, the central bank buys assets from banks in exchange for new reserves (instead of outright buying, a repurchase agreement may be made). However, banks also have the option to directly borrow reserves from the central bank, at a fixed interest rate.