<blockquote>
  <p>Per fractional reserve system, banks lend deposited money as credit to clients provided they keep a reserve requirement.</p>
</blockquote>

<p>This is a misleading statement. A bank loan creates a deposit, which can be transferred to other forms of deposits.</p>

<blockquote>
  <p>Does this apply to both transaction accounts and deposit accounts?</p>
</blockquote>

<p>As the above explained, this is not applicable.</p>

<blockquote>
  <p>If yes, is the reserve requirement percent the same for both?</p>
</blockquote>

<p>Each country has its own rules. Countries like Canada abolished reserve requirements in the 1990s. The United States was the main countries with reserve requirements, but I believe those were suspended during the 2020 Crisis. Before the suspension, reserves depended upon the type of account, and so were somewhat incoherent (e.g., banks would “sweep” deposits between accounts at the end of the day to reduce reserve requirements).</p>

CC BY-SA 4.0
2020-04-28T13:33:28.370Z
2020-05-28T15:11:16.417Z
2020-05-28T15:11:16.417Z
Brian Romanchuk
<p>Transaction/checking accounts are highly liquid - M1</p>

<p>Deposit accounts are less liquid - M2</p>

<p>Per fractional reserve system, banks lend deposited money as credit to clients provided they keep a reserve requirement. </p>

<p>Does this apply to both transaction accounts and deposit accounts? If yes, is the reserve requirement percent the same for both?</p>

<monetary-policy><banking><money-supply><credit>
Can a commercial bank lend money from transaction/checking account as it would from a deposit account?
Random42
# Can a commercial bank lend money from transaction/checking account as it would from a deposit account?

(Asked by: username_0 on 2020-04-28)

Transaction/checking accounts are highly liquid - M1

Deposit accounts are less liquid - M2

Per fractional reserve system, banks lend deposited money as credit to clients provided they keep a reserve requirement.

Does this apply to both transaction accounts and deposit accounts? If yes, is the reserve requirement percent the same for both?

**Tags:** monetary-policy, banking, money-supply, credit

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## 1 answers

### Answer by username_1 on 2020-04-28. Score: 1

> Per fractional reserve system, banks lend deposited money as credit to clients provided they keep a reserve requirement.

This is a misleading statement. A bank loan creates a deposit, which can be transferred to other forms of deposits.

> Does this apply to both transaction accounts and deposit accounts?

As the above explained, this is not applicable.

> If yes, is the reserve requirement percent the same for both?

Each country has its own rules. Countries like Canada abolished reserve requirements in the 1990s. The United States was the main countries with reserve requirements, but I believe those were suspended during the 2020 Crisis. Before the suspension, reserves depended upon the type of account, and so were somewhat incoherent (e.g., banks would “sweep” deposits between accounts at the end of the day to reduce reserve requirements).


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