Asklemmy

I don't think you understand how fractional reserve banking works. The first paragraph of that Wikipedia page already clearly contradicts you. The banks can still only lend money they have (otherwise how would they lend it? Where would it come from? Only the central bank can print currency). What fractional reserve banking is saying is that banks can invest some portion of the customer deposits that they hold into non-liquid assets, often in the form of loans to other customers, but it could also be invested in other things eg government bonds. The interest banks earn by doing that helps pay for the interest they pay to customers on their saving. They also have to carefully manage their liquidity: maximising returns while still holding enough liquid assets to cover any potential spikes in withdrawals.

Even when investing customer funds, banks still have to meet captial requirements set by the regulators which basically say that their risk-adjusted assets have to cover the liabilities of customer deposits, so that for example they can't just invest all the deposits in Bitcoin as that would pose too high a risk of insolvency. The reason SVB went insolvent recently was that they successfully lobbied the Trump administration to relax capital requirements for banks of their size, then made risky investments that lost money and they suddenly had less money than they owed their customers.