[martinw]

I'm reading a book and it says the following.

"In the nineteenth century banks often had "capital ratios" of 20 or 25 percent - that is, the value of their deposits was only 75 or 80 percent of the value of their assets. This meant that a nineteenth-century bank could lose as much as 20 or 25 percent of the money it lent out, and still be able to pay off its depositors in full."

I get the concept, but what I dont understand is where the bank gets the expendable 20/25% extra money to lend out, if not from their depositors?

[MBT Bot]

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