A banking spreadsheet that may help understanding.

 

Bank 1

Bank 2

Iteration

 Capital

Reserve

Suspense (Loan out)

Iteration

Capital

Reserve

Suspense (Loan out)

 

100.00

             

1

 

5.00

95.00

   

95.00

   
 

90.25

     

2

 

4.75

90.25

3

 

4.51

85.74

   

85.74

   
 

81.45

     

4

 

4.29

81.45

5

 

4.07

77.38

   

77.38

   
 

73.51

     

6

 

3.87

73.51

7

 

3.68

69.83

   

69.83

   
 

66.34

     

8

 

3.49

66.34

9

 

3.32

63.02

   

63.02

   
 

59.87

     

10

 

3.15

59.87

11

 

2.99

56.88

   

56.88

   
 

54.04

     

12

 

2.84

54.04

13

 

2.70

51.33

   

51.33

   
 

48.77

     

14

 

2.57

48.77

15

 

2.44

46.33

   

46.33

   
 

44.01

     

16

 

2.32

44.01

17

 

2.20

41.81

   

41.81

   
 

39.72

     

18

 

2.09

39.72

19

 

1.99

37.74

   

37.74

   
 

35.85

     

20

 

1.89

35.85

 

35.85

32.90

625.06

   

0.00

29.37

593.81

Total Deposits

693.81

       

625.06

   
Total reserves  

32.90

       

29.37

 
Total Loans    

625.06

       

593.81

                 
Aggregate of both banks In this example, reserves are accounted for separately from capital
Deposits

1318.88

  available to make a loan. I think it is a little clearer that way.
Loans

1218.88

  But in normal use, capital includes reserves.  
Reserves

62.26

  This example is simple banking the way it was 200 years ago.

 

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