fractional banking

fractional banking

a BANKING SYSTEM in which banks maintain a minimum RESERVE ASSET RATIO in order to ensure that they have adequate liquidity to meet customers’ cash demands. See COMMERCIAL BANK.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
Mutual insurance companies, which derive from risk sharing, limited-purpose banking which moves away from interest-based or fractional banking and equity financing, are all ideas consistent with Islamic finance principles, and are practised across the world without any reference to the religion.
An analyst, Kirk Leigh regretted that when old worn-out notes are being surreptitiously channelled back into the system, there are no records of the 'transactions' and the immediate implication is that the Central Bank has an inaccurate, amount of currency in circulation and therefore has no control of aspects of monetary policy couched on fractional banking and interest rates.
So-called fractional banking means that these institutions maintain only a modest proportion of funds in liquid form, while pumping substantially unbacked credit to consumers and businesses alike, besides their investment portfolios and other exposures.
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