fractional reserve system (FRS) definition

fractional reserve system (FRS)

Monetary policy at the basis of the modern banking system. Under FRS, banks are required to hold only a fraction (typically 12 percent) of the depositors' funds as cash reserves. The remaining 88 percent of deposited funds can be loaned out to create new deposits which in turn create new loans ... and so on, exerting a multiplier effect on the total money supply. However, in case of a bank run, this policy can cause banks to suffer huge losses and may even push them into bankruptcy.

fractional reserve system (FRS) is in the Banking, Commerce & Finance and Economics, Politics, & Society subjects.

fractional reserve system (FRS) appears in the definitions of the following terms: free reserves, money multiplier and credit

This content can be found on the following page:

http://www.businessdictionary.com/definition/fractional-reserve-system-FRS.html