In a free banking system there are limits to the practice of maturity mismatching by banks besides the wish to comply with the wisdom of the principles of sound finance and secure financing sources.
A similar procedure limits the amount of maturity mismatching in a free banking system.
Another check to maturity mismatching is provided by bank customers.
Credit expansion as a special case of maturity mismatching
the granting of credits with demand deposits, is a special case of maturity mismatching.
Thus, fractional reserve banking is maturity mismatching in extremis, as it relies on liabilities with zero maturity and the need to roll them over continuously.
This insight applies to other kinds of maturity mismatching.
The difference between fractional reserve maturity mismatching and other forms of maturity mismatching is that via fractional reserve banking the money supply is increased.
Another difference between fractional reserve banking mismatching and other mismatching is its legal and ethical status.
Fractional Reserve Banking as a Promoter of Excessive Maturity Mismatching
Fractional reserve banking boosts the use of maturity mismatching by increasing overall liquidity and financing opportunities.
Central Banking as a Promoter of Maturity Mismatching