alt Hacker News> fractional reserve banking and do the math
all models are wrong but some are still useful. This model isn’t useful at all since the fraction was legislated to be 0 years ago.
> fractional reserve banking and do the math
all models are wrong but some are still useful. This model isn’t useful at all since the fraction was legislated to be 0 years ago.
That's in the US. Canada for example never had any legal reserve requirements.
However legal limits aren't the only ones that apply. Canadian banks still keep more than zero reserves around.
The more useful limitation in economic terms and in legal terms is on the amount of capital banks need to hold. A capital cushion is what makes your deposits stable, not reserves.
If you have a big enough capital cushion, you can always go and liquidate some assets to get the reserves needed to satisfy withdrawal requests. Having some reserves on hand is just very convenient, so the customer doesn't have to wait.