Topic: Is there any proof fractional reserve banking goes on to in the UK or globally (Read 230 times)

Yeah insurance on savings is a thing here, it's generally per bank per person too...
So the £86k limit of FSCS protection is just per entity relationship (citizen number to bank).

I think it's important to note that these banks aren't acting all by themselves when they're 'creating' this money. They're working alongside the Federal Reserve to be allowed to just electronically create the funds. The fed knows how much money is being created, and there is regulation when this is done. it's not like a bank can just send you 1 trillion dollars without any sort of oversight at all.

But back onto the topic here: Yes, fractional reserve banking is a VERY common practice in the world. Typically only comes up around common people when there is some sort of bank run. But ya know, in the US and EU there is the FDIC / EU backing of funds in the bank (up to 250??k in the us, and 100k in the EU)

Not only does fractional reserve banking take place, but combined with lending out money that doesn't actually exist, it is the main form of money creation in the world. Lots of people think that the majority of new money which enters circulation is "printed" by the government, when in fact, only about 3% of it is. Around 97% of new money entering circulation comes from banks practicing fractional reserve and therefore creating new money to lend out.

Now, in terms of the UK specifically, here are a couple of publications directly from the Bank of England (the UK's central bank) which you might find interesting.

The first one, available here (https://www.bankofengland.co.uk/-/media/boe/files/speech/2016/central-banks-and-digital-currencies.pdf), is from a presentation given by the Deputy Governor for Monetary Policy. I would draw your attention to the first chart at the top of page 9, showing that "Reserves inc. cash" is absolutely dwarfed by the "Liabilities" column.

The second one, available here (https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf), is a report the Bank of England issues a few years ago. It specifically states that commercial banks practice fractional reserve and create new money out of thin air. Here are a couple of relevant quotes:

Very interesting. I hadn't known that.

Its more a derivative market of some type.

There are two harmful potential consequences to commingling. First, the practice makes it difficult to distinguish between assets and liabilities in a CCP’s balance sheet because they are not required to disclose individual amounts. As a result, there is no way to know whether they have enough assets to cover their liabilities.

Rehypothecation further complicates bitcoin’s identity. Put simply, rehypothecation allows CCPs to use given bitcoin as collateral several times. “It is the process by which a lender receives an asset as collateral for a loan, and then pledges that collateral to cover its own exposure to a separate party which then pledges the same collateral to a different part,” explains Long.

This is relevant to Wall Street players like Bakkt, who under CFTC regulations can legally pledge a single BTC to multiple people.

Back to my other point, is this not already designed by beurocrats to encourage a lot of spending?

If someone didn't pay their loan then their collateral would be put up for sale and the bank would already have needed to print money to pay them, but wouldn't this already be factored into the government measured inflation?

(the British government measures inflation based on grocery prices so surely this would still remain fairly stable as the currency has already been minted into the supply).

As in they started printing paper money?

I know it's legally possible in most places to print counterfeit money outside of a country and attempt to use it in the country you're in (or it used to be and was a very weird loophole). Is this what's going on or are people actively printing money inside the country and its being accepted?

Just going to use this post to explain what it is so if you have proof feel free to reply without reading this.

As I understand it (not looked at it recently) fractional reserve banking is a system that allows banks more earning power on money you put in while allowing the customer access to some of their funds.

For example (@10% reserve):
If you deposit $3000 into a bank account, the bank is able to lend out $2700 and keep $300 of your original $3000.
If this $2700 is then lent out to someone who wants to buy a new kitchen for example, they pay the cashier and the business owner receives the funds in their account. Now of this $2700 the bank is able to lend out $2430 and store $270 of the original funds as the reserve and this can continue on...

This often gets explained as a "concept" or "theory" but does this actually happen?

Since the commonly used example allows $1000 to become $9000 (I may update this if I get libre running). Edit: spreadsheet says $2912.37 as a floor of the number of new money produced with a 10% reserve).

I think the fractional reserve is not often quote by mainstream news, but in Asia we are frequent to deal with “shadow banking”, they might be entire two sort of terms, by I feel they share the same purpose, although the shadow banking is openly printing money out of thin air, if you want to challenge it then go ahead and try.

Just going to use this post to explain what it is so if you have proof feel free to reply without reading this.

As I understand it (not looked at it recently) fractional reserve banking is a system that allows banks more earning power on money you put in while allowing the customer access to some of their funds

Good points but that doesn't mean BTC are being created. It just means multiple people believe they own the same BTC, so in a bank run an insolvency would become apparent.

You can read my thread where i try to explain that even a bitcoin is not creation resistant:

https://bitcointalksearch.org/topic/m.49096584

This often gets explained as a "concept" or "theory" but does this actually happen?

This description of money creation contrasts with the notion that banks can only lend out pre-existing money, outlined in the previous section. Bank deposits are simply a record of how much the bank itself owes its customers. So they are a liability of the bank, not an asset that could be lent out.

In reality, neither are reserves a binding constraint on lending, nor does the central bank fix the amount of reserves that are available.

Wysokość stopy rezerwy obowiązkowej ustala Rada Polityki Pieniężnej. Od 31 grudnia 2010 r. stopa rezerwy obowiązkowej wynosi 3,5 proc.

The required reserve rate is set by the Monetary Policy Council. From December 31, 2010, the required reserve ratio is 3.5 percent.

A depository institution's reserve requirements vary by the dollar amount of NTAs held by customers of that institution. Effective 18 January 2018, institutions with net transactions accounts:

Of less than $16 million have no minimum reserve requirement;
Between $16 million and $122.3 million must have a liquidity ratio of 3% of NTAs;
Exceeding $122.3 million must have a liquidity ratio of 10% of NTAs.[8]

United Kingdom
In the UK the term clearing banks is sometimes used, meaning banks that have direct access to the clearing system. However, for the purposes of clarity, the term commercial banks will be used for the remainder of this section.

The Bank of England, which is the central bank for the entire United Kingdom, previously held to a voluntary reserve ratio system, with no minimum reserve requirement set. In theory this meant that commercial banks could retain zero reserves. The average cash reserve ratio across the entire United Kingdom banking system, though, was higher during that period, at about 0.15% as of 1999.[12]

From 1971 to 1980, the commercial banks all agreed to a reserve ratio of 1.5%. In 1981 this requirement was abolished.[12]

From 1981 to 2009, each commercial bank set out its own monthly voluntary reserve target in a contract with the Bank of England. Both shortfalls and excesses of reserves relative to the commercial bank's own target over an averaging period of one day[12] would result in a charge, incentivising the commercial bank to stay near its target, a system known as reserves averaging.

Upon the parallel introduction of quantitative easing and interest on excess reserves in 2009, banks were no longer required to set out a target, and so were no longer penalised for holding excess reserves; indeed, they were proportionally compensated for holding all their reserves at the Bank Rate (the Bank of England now uses the same interest rate for its bank rate, its deposit rate and its interest rate target).[13] In the absence of an agreed target, the concept of excess reserves does not really apply to the Bank of England any longer, so it is technically incorrect to call its new policy "interest on excess reserves".