Why do full reserve banks put all their depositors' money in reserve while depositors still have the right to deposit?

Why is it called full reserve banking when people can deposit their money there?

  • 4
    $\begingroup$ What is the problem with depositors and full reserve banking? $\endgroup$
    – Alex
    Commented Sep 12, 2022 at 17:34
  • 1
    $\begingroup$ Please clarify your specific problem or provide additional details to highlight exactly what you need. As it's currently written, it's hard to tell exactly what you're asking. $\endgroup$
    – Giskard
    Commented Sep 13, 2022 at 6:08
  • $\begingroup$ Ok, thank you. Why are all deposits kept in these banks' reserves? How is it safe for these banks to have their reserves lowered or increased due to depositors' need to withdraw or to use their money? $\endgroup$
    – okman
    Commented Sep 13, 2022 at 7:46
  • $\begingroup$ Re: "while depositors still have the right to deposit?" - did you mean "while depositors still have the right to withdraw?" $\endgroup$
    – Mick
    Commented Sep 15, 2022 at 6:41
  • $\begingroup$ I don't believe so, but I may be wrong. $\endgroup$
    – okman
    Commented Sep 16, 2022 at 9:29

1 Answer 1


Full reserve is just a bank holds that 100% of a demand deposit as a reserve.

Full reserve banks are still banks since by definition:

bank, an institution that deals in money and its substitutes and provides other money-related services.

Note full reserve banks keep full reserves only on demand deposits.

They still can serve as intermediary when it comes to time deposits. Also, even when they focus primarily on demand deposits, they would still qualify as a bank under the above definition.

  • $\begingroup$ Hi, thanks for the help! Don't you think that it is dangerous for these banks to keep full reserves on demand deposits? Since account holders could use their money whenever they want, how is a varying reserve amount any good for these banks? Also, I thought they didn't lend demand deposits... $\endgroup$
    – okman
    Commented Sep 13, 2022 at 7:39
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    $\begingroup$ @okman 1. Dangerous how? That actually makes them super safe - they are usually bit more expensive to have account in, in exchange for being completely immune to bank panic 2. Account holders in any bank can withdraw money whenever they want. You can go to regular bank that does keep minimal reserves open deposit account and you can withdraw that money any time. That is what the word on demand in on demand deposits mean. 3. No full reserve banks don’t lend demand deposits but they still lend time deposits $\endgroup$
    – 1muflon1
    Commented Sep 13, 2022 at 8:01
  • $\begingroup$ @okman you are welcome if you think this answer answered your question consider accepting it $\endgroup$
    – 1muflon1
    Commented Sep 13, 2022 at 8:28
  • $\begingroup$ I agree that a full-reserve institution should be defined as a bank, at least in layman's terms but at least in the UK it is absolutely NOT allowed to call itself a bank by the banking regulators. Indeed there was a documentary series here about a businessman called Dave Fishwick who wanted to start a full reserve "bank" and call it "Bank of Dave". He discovered that he was not allowed to give it that name and he had to change it to "Bank on Dave" (it changed again later to Burnley Savings an Loans) -> youtube.com/watch?v=0fIGZOe-Oa0 $\endgroup$
    – Mick
    Commented Sep 15, 2022 at 6:16

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