<Tr> <Td> <Ul> <Li> </Li> <Li> </Li> <Li> </Li> </Ul> </Td> </Tr> <Ul> <Li> </Li> <Li> </Li> <Li> </Li> </Ul> <P> Fractional - reserve banking is the practice whereby a bank accepts deposits, makes loans or investments, but is required to hold reserves equal to only a fraction of its deposit liabilities . Reserves are held as currency in the bank, or as balances in the bank's accounts at the central bank . Fractional - reserve banking is the current form of banking practiced in most countries worldwide . </P> <P> Fractional - reserve banking allows banks to act as financial intermediaries between borrowers and savers, and to provide longer - term loans to borrowers while providing immediate liquidity to depositors (providing the function of maturity transformation). However, a bank can experience a bank run if depositors wish to withdraw more funds than the reserves that are held by the bank . To mitigate the risks of bank runs and systemic crises (when problems are extreme and widespread), governments of most countries regulate and oversee commercial banks, provide deposit insurance and act as lender of last resort to commercial banks . </P>

Under a fractional reserve banking system the amount of money loaned out
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