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Fractional reserve banking guarantees that banks always have a shortfall of cash! ;-)

• dredmorbius 13y ago
  Not a shortfall. They're in short position on cash though. Law of large numbers says that most people don't need their deposits most of the time. Lender of last resort (a/k/a central banking) says that a bank can always get more cash if it needs to, though it may risk insolvency. The depositors aren't at risk (subject to limits of deposit insurance, for private depositors, and yes, commercial depositors may, IIUC, be SOL, but businesses don't tend to stockpile cash reserves as people do). One interpretation of HSBC's actions is that its reserves are falling and it needs to do what it can to shore up its balance sheets by preventing withdrawals. Again: ordinary private depositors should have limited concerns. It'll be interesting to see what develops over the next few weeks. Possibly months.
• runeks 13y ago
  No, it is not fractional reserve banking that guarantees this, but duration mismatch. A bank investing money from demand deposits into 30-year bonds is what causes this, but fractional reserve banking does not necessitate this practice. Full reserve banking means banks just hold your money, and don't invest it in anything, which would mean you'd have to pay them to store your money.