Curious Minute answer

What is the term for the practice of banks keeping only a fraction of deposits in reserve and lending out the rest?

The answer

Fractional reserve banking

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Why it's right

Fractional reserve banking is the system where banks hold only a small percentage of depositors' money in reserve and lend out the remainder. This practice is what allows banks to create credit and is fundamental to how modern banking systems expand the money supply.

federalreserve.gov: reservereq.htm Wikipedia: Fractional reserve banking

Did you know?

The Federal Reserve reduced reserve requirement ratios to zero effective March 26, 2020. That change did not remove banks' other capital and liquidity obligations.

federalreserve.gov: reservereq.htm

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Sources: federalreserve.gov, Wikipedia