Fractional-Reserve Banking
Fractional-reserve banking is taking deposits and holding only a fraction in reserves or liquid assets — credit creation with a run risk.
Definition
Deposits are liabilities; loans and securities are assets. Reserve ratios and, today, liquidity and capital ratios constrain the mix. Most ‘money’ is bank deposits. The run is the moment depositors want reserves all at once.
Why it matters
It is the core of why banks exist and why they fail. Deposit insurance and the lender of last resort are the patch.
Case
SVB: long assets, runnable deposits, thin held equity after marks. Fractional reserves plus duration plus no insurance on the tail.
How to read it
Reserve/liquidity ratios, asset duration, and deposit stickiness. The textbook multiplier is not how modern ample-reserve systems work day to day.