fractional reserve banking definition by Wordo

Noun

A

widespread

banking

system

in

which

a

bank

that

accepts

deposits

from

the

public

puts

the

majority

of

those

deposits

into

investments

(

generating

a

profit

for

the

bank

)

as

opposed

to

keeping

them

all

in

reserve

(

i

.

e

.,

directly

on

hand

);

the

system

assumes

that

it

is

unlikely

that

every

customer

would

need

to

withdraw

their

money

at

the

same

time

(

i

.

e

.,

a

bank run

).