Fractional Reserve Bank


A fractional reserve bank is a person or a group of people that has obtained the right from the government to produce claims to fiat money and make them available in credit transactions, so long as it has obtained a certain amount of actual fiat money from other individuals which it keeps as immediately available demand deposits for the consumer’s convenience against a deposit fee. In the United States banks have to maintain a reserve ratio of 10%, meaning they need to keep 10% of their customers’ claims to fiat money in the form of actual fiat money.

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