If a bank gets $100 deposited and has to put aside reserves on that, can $1,000 be loaned out? If so, how does bank balance its books to keep its check from bouncing?
A bank accepts deposits. A portion of these deposits are placed in reserve. The remaining deposits are then invested so that a maximum rate of return may be realized. Some of these investments are in loans, which will repay the amount borrowed plus interest.
Banks do monitor their loan-to-deposit ratio, and it may be that their ratio will exceed 100%. This is a safe practice because there is little chance that all the depositors would want to withdraw their funds and that all the loans would default. The deposits are FDIC insured to $100,000 or more now, for qualified retirement accounts. Banks also have the ability to borrow when needed and have well thought out liquidity plans. These plans allow staggered redemption periods on investments they make as well as what loan to deposit ratio they will go to before an event is triggered. We have one of the best financial systems in the world and it has been very successful for a long time. This is due to banking laws, regulations and oversight. Banks are generally restricted from risk investments and from getting involved in non-banking activities that pose a risk to their depositors. The FDIC has financial information on your bank so you, or your accountant, can determine their financial health if desired.
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A bank accepts deposits. A portion of these deposits are placed in reserve. The remaining deposits are then invested so that a maximum rate of return may be realized. Some of these investments are in loans, which will repay the amount borrowed plus interest. 