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Introduction to Fractional Reserve Banking

Finances and Banking
Free Course

Learn more about fractional reserve banking and how it works.

  • Duration

    1-2 Hours
  • Assessment

    Yes
  • Certification

    Yes
  • Publisher

    Khan Academy
Description Outcome Certification View course modules

Fractional reserve banking is a key concept in banking. It means banks maintain only a fraction of the total amount of money in all their customers’ deposit accounts as cash that is available for withdrawal by depositors. By doing this, banks free up large supplies of capital that can be loaned out to businesses, thereby helping to expand the economy. The economic system of most countries utilise this concept.

This banking course explains in detail what fractional reserve banking is and how this banking system works. The course reviews the strengths and weaknesses of the fractional reserve banking system; for example, it helps economies grow but banks are also very vulnerable if there is a run on a bank and all depositors try to withdraw their money at the same time. As an alternative, full reserve banking is also explored and you will also see how money is accounted for in the balance sheets of banks.

This banking course will be of great interest to professionals in the banking, finance, economics and business fields who would like a greater knowledge and understanding of fractional reserve banking and the strengths and weaknesses of this system of banking.

Learning outcomes: - Learn what fractions reserve banking is and how it works; - Understand what the main pros and cons of the system are; - Understand what the alternative, namely full reserve banking is; - Know what the different views of money are and how they are calculated; - Learn how banks present information about their key assets and liabilities;

All Alison courses are free to enrol, study and complete. To successfully complete this Certificate course and become an Alison Graduate, you need to achieve 80% or higher in each course assessment. Once you have completed this Certificate course, you have the option to acquire official Certification, which is a great way to share your achievement with the world. Your Alison Certification is:

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