The most common form of banking among commercial banks, fractional reserve banking, requires that only a fraction of deposits are backed by actual reserves.
The theory behind such a system is for economic expansion by increasing the free-flow of capital for lending by banks. In most cases, banks only have to keep 10% of deposited amounts in their reserves.
This essentially means that for every $100 the bank receives from its customers, it is permitted to lend out $90, in most cases.
