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How does fractional reserve banking work

  • 26-07-2021 01:32AM
    #1
    grofus2
    Registered Users, Registered Users 2 Posts: 118 ✭✭


    Is it true that banks lend money as a debt. Ie. Lonee applies for a loan, let's say €5000. The Lonee then signs a loan agreement which then becomes a negotiable instrument according to the bills of exchange act. The bank then monetizes the negotiable instrument and " lends" the amount shown on the note to the lonee. Then the bank demands monthly payments + interest from the lonee to satisfy the debt for a set period of time, when the reality is the lonee funded the 'loan' all along. Isnt this true for mortgages, credit cards and all bank loans?


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