Weaknesses of Fractional Reserve Lending
As banks are only required to keep a fraction of all deposits as reserves, the risk is there for depositors asking to withdraw their deposits in droves in the event of unfavorable market conditions. How can a bank operating in this system ensure that it can fulfil its obligations to its customers? Watch this lecture about the weaknesses of fractional reserve lending.
Source: Khan Academy, https://www.youtube.com/watch?v=1HYSMxu-Dns
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 License.