From the perspective of assets therefore, equity and liabilities are identical. As economic theoreticians, our thinking is not confined to the arbitrary definitions of accounting. The effect on the bank's capability to make loans in either example is exactly the same. On day one in the very beginning, the reserves the bank has against its deposits is exactly 100 percent. Once the bank makes a loan, however, its reserves become less than 100 percent, which is the theoretical concept of fractional reserves.
Banking is a variation of the concept of insurance, the shared pooling of risks.
It helps the wheel of commerce to turn. Every institution that makes loans is operating on the basis of fractional reserves, even if putatively its reserves are 100 percent. Any distinction between banks and bank-like financial institutions is purely artificial. Even a pawn shop falls within this category. In effect the pawnshop owner has only one depositor, himself, from whose deposits he makes loans.