No. If I accept $10 in deposits, make $8 in loans, and have $3 of cash on hand, I'm operating a fractional reserve. I have $11 in assets ($3 cash, and $8 of l

No. If I accept $10 in deposits, make $8 in loans, and have $3 of cash on hand, I'm operating a fractional reserve. I have $11 in assets ($3 cash, and $8 of loans receivable), and $10 in liabilities (cash owed to depositors). There's some risk if my loans go bad, but it's fundamentally sane. Insolvency, on the other hand would be if I accept $10 in deposits, make $8 in loans, and have $0 cash on hand. At this point, I'm insolvent. There's no reason to believe I can pay back my depositors because my liabilities are greater than my assets. Even if all the loans are repaid, I simply don't have the money.