What is Full Reserve Bank?
How is it different from traditional
(fractional reserve) bank?
Fractional Reserve Bank
All major banks worldwide
- Banking system
- Only hold a fraction (5-10%) of depositors’ funds in reserve and lend out or make investments with the remaining funds.
- Bank run
- Bank runs can occur when confidence in banks declines, leading to a surge in withdrawal requests that can exceed the bank's reserves and potentially cause insolvency
- Liquidity
- Bank maintains reserves to cover normal withdrawal activity, but when deposits are withdrawn at a faster rate than usual, a liquidity shortfall occurs.
- Stability
- Banks must effectively control their exposures to risk in order to be financially stable. If depositors doubt the bank's assets are worth more than its liabilities, a bank run could occur.
Fractional Reserve Bank
All major banks worldwide
- Banking system
- Only hold a fraction (5-10%) of depositors’ funds in reserve and lend out or make investments with the remaining funds.
- Bank run
- Bank runs can occur when confidence in banks declines, leading to a surge in withdrawal requests that can exceed the bank's reserves and potentially cause insolvency
- Liquidity
- Bank maintains reserves to cover normal withdrawal activity, but when deposits are withdrawn at a faster rate than usual, a liquidity shortfall occurs.
- Stability
- Banks must effectively control their exposures to risk in order to be financially stable. If depositors doubt the bank's assets are worth more than its liabilities, a bank run could occur.
Full Reserve Bank
- Banking system
- Required to hold the full amount of each depositor’s funds in reserve, available for immediate withdrawal. Banks cannot lend out or make investments with these funds.
- Bank run
- Even when a bank run does occur, it cannot cause an insolvency since all customer deposits are available for immediate withdrawal at any time.
- Liquidity
- A Full Reserved Bank will never experience a liquidity crunch since all customer deposits are fully backed by corresponding cash reserves, available for immediate withdrawal any time.
- Stability
- Full Reserve Banks are much more financially stable as they do not borrow short and lend long. They do not create liabilities that promise to be liquid while holding few liquid assets themselves.
We strongly believe that Banks should not take risk with customer deposits to profit during good times, only to be bailed out by taxpayer money when a crisis happens.
ORO Bank will always have customer deposits on-hand, even if a massive bank run occurs.
Mike Kayamori
Founder and CEO ORO Bank
To better understand the difference between these 2 banking models,
let’s go to an example
You have $1,000.
You deposit into a traditional “fractional reserve” bank.
The bank typically keeps only 5–10% of customers’ deposits.
If more customers than expected go to the bank and withdraw their funds at the same time, the bank will face a liquidity crunch and potentially become insolvent.
Similar to the US banking crisis of
March 2023
Now, if you deposit $1,000 to
a full reserve bank,
like ORO Bank?
Full reserve bank holds 100% of customers’ deposits and does not engage in lending or investment. Customers can withdraw any amount at any time without any issue.
Try ORO Bank to
have a peace of mind
Open ORO account in 10 minutes or less.