It's because of the partial reserve system that the banking sector uses which helps them generate money from thin air. If a bank gets 100 USD from a user it can keep 10 as a reserve and use 90 to give a loan. The actual figure for this money distribution is backed by $100, but the total amount of money owned by the bank is 190 dollars. So their total wealth increased to 190 dollars, which is backed by only 100 dollars and 90 dollars they just generated by using the partial reserve system. All the banks in the world follow this system.
thats not how it works
fractional reserve system is about not having to have 100% physical money ina bank vault for security reasons of said bank branch
fractional reserve lending is a different fraction 'pot'. for different purpose. for different function and reason
but lets delve into it
banks do not take 10% of someones bank balance to lend out..
instead imagine a bank had 1000 customers of $7.5k each account ($7.5m)
the bank without touching deposit amounts has a separate facility to allow them to CREATE $750k of "loan" money
without taking any money from their customers..
think of it as not taking money from customers.. but more of a "heres how much we have in custody we will take a 10% risk bet and create new money to the amount of 10% of custody.. "
but they want the loanee to repay that amount so the bank can burn that money(lessen the interest) reopen/unlocked that risk allowance loan facility for the next loan
EG when 100 people ask for $1k ($100k) in a loan.. the banks facility can only make another $650k loans..
so if more loans were made but no money was returned they cant make new loans. as the risk allowance gets down to zero
what you find is. instead of customers deposits being used.. banks sell the already created, but not settled loan agreements to other institutions so that the other institutions pay in and burn that money to unlock the risk allowance.. and the loanee pays the other institution indirectly(im over simplifying)
bank customers balance is not locked, decreased, used to fill a lending pot. its just a risk measure of how much a bank can create a pot and create new money in it to a certain tolerance based on total value under custody