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Yup .. in US it is totally choice of bank to loan out as much as they want or put in assets like T bills. . but that is not what Fractional Reserve means ..

I think it means they need to maintain a fraction of their funds with Fed .. as their reserves go down or up .. there is interbank borrowing .. Fed sets up the rates for interbank lending .. called short term Target rates ...

Since Target rates are implemented only for a fraction of banks bank sheet , it is called Fractional Reserve system ..

It has nothing to do with how much or not banks may lend out ..

Did it make sense ?

IntuitiveGuy☯️ 11mo ago

It has to do on how much banks can use deposits in order to do whatever they want to, from lending to buy Tbills or anything else.

At least here Riserva Bancaria Frazionaria, is that portion "fraction" of reserves that banks must take and save in Central Banks to avoid risks. So 1% is what they must to save, the rest they can lend and or buy bills or bonds.. lol.

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Discussion

Satosha 11mo ago

Exactly.. that is what Fractional Reserve means .. central banks use it to determine short term interbanks lending rate ..

Most people think fractional reserve means that banks can loan out all my money .. and that is like a crime or something.. no .. as long as they have balanced balance sheet .. and audited .. it is all fine ..

IntuitiveGuy☯️ 11mo ago

It's audited..

Satosha 11mo ago

Lol .. media didn't show up .. sure you can find issues with audit .. every system can be improved ..