Fractional Reserve Banking 🏦Fractional reserve banking operates by allowing banks to lend out a portion of their deposits while retaining a fraction as reserves to meet withdrawal demands. When a customer deposits money, the bank keeps a required percentage, known as the reserve requirement, as reserves, determined by the central bank. For instance, with a 10% reserve requirement, a bank must retain $10 for every $100 deposited and can lend out the remaining $90. This lending process effectivel